DOCUMENT RESUME

ED 404 755 EA 028 261

AUTHOR Millot, Marc DeanTITLE A Guidebook for Chartering Agencies.INSTITUTION Rand Corp., Santa Monica, CA. Inst. on Education and

Training.; Washington Univ., Seattle. School ofBusiness Administration.

SPONS AGENCY Department of Education, Washington, DC.REPORT NO DRU-1545-EDPUB DATE Nov 96NOTE 106p.

PUB TYPE Guides Non-Classroom Use (055)

EDRS PRICE MF01/PC05 Plus Postage.DESCRIPTORS *Accountability; *Charter Schools; *Compliance

(Legal); Elementary Secondary Education; FreeEnterprise System; *Institutional Autonomy; PrivateEducation; Public GL:buois; Suhuoi Based Management;*School Organization; State Legislation; StateStandards

ABSTRACTAs of November 1996, at least 25 states had passed

charter-school legislation empowering agencies of state government toenter into agreements with private individuals and groups to operatepublic schools. This is a guidebook for government agencies given thepower to permit individuals and groups to operate autonomous publicschools under state "charter school" legislation. It is intended tohelp chartering agencies develop their own charter school programs byproviding information on: (1) charter-school concept and thedifferent types of charter statutes; (2) the capabilities required ofcharter applicants to develop and implement their school programs;(3) the types of applicants that agencies are likely to encounter, aswell as other private-sector actors involved with charter schools;(4) the specific functions and capabilities of chartering agencies;and (5) advice for chartering agencies initiating a charter-schoolprogram. Nine figures and one table are included. (LMI)

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Reproductions supplied by EDRS are the best that can be madefrom the original document.

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RAN D

A Guidebook for Chartering Agencies

Marc Dean Minot

DR11-7545-ED

November 1996

Prepared for: U.S. Department of Education

BEST COPY AVAILABLE 2

S. DEPARTMENT OF EDUCATION0 ice 01 Eclocanoner Research and Improvement

E CATIONAL RESOURCES INFORMATIONCENTER (ERIC)

This document has been reproduced asreceived from the person or organizationoriginating it.

Minor changes have been made toimprove reproduction quality.

Points of view or opinions stated in thisdocument do not necessarily representofficial OERI position or policy.

RAN D

A Guidebook for Chartering Agencies

Marc Dean Minot

DRU-1545-ED

November 1996

Prepared for: U.S. Department of Education

Institute on Education and TrainingUW/RAND Program on Reinventing Public Education

The RAND unrestricted draft series is intended totransmit preliminary results of RAND research.Unrestricted drafts have not been formally re-viewed or edited. The views and conclusionsexpressed are tentative. A draft should not becited or quoted without permission of the author,unless the preface grants such permission.

RAND is a nonprofit institution that helps improve public policy through research and analysis.RAND's publications and drafts do not necessarily reflect the opinions or policies of its research sponsors.

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Preface

This is a guidebook for government agencies given the power to permit privateindividuals and groups to operate autonomous public schools under state"charter school" legislation. It is intended to help chartering agencies developtheir own charter school programs by providing basic information on:

The charter school concept and the different types of charter statutes.

The capabilities required of charter applicants to develop and implement theirschool programs.

The types of applicants agencies are like to encounter, as well as other privatesector actors involved with charter schools.

The specific functions and capabilities of chartering agencies.

Advice for chartering agencies initiating a charter school program.

This guide is an introduction to charter schools, not a prescription for a charterschool program. Charter school laws vary by state. Local circumstances vary byjurisdiction and chartering agency. Chartering agencies should consider theideas laid out here and adapt them to their own needs and philosophies ofmanagement.

This work was sponsored by the U.S. Department of Education and conductedby the RAND Institute on Education and Training (IET) and the jointRAND/University of Washington (UW) Program on Reinventing PublicEducation.

Contents

Preface iii

Figures vii

Tables ix

Summary xi

Ackricy-vvieclgriaents xxvii1. Introduction 1

2. The Charter School Concept 3Traditional Public Schools 4Private Schools 5Voucher Proposals 7State Standards 8Site-Based Management 9Charter Schools 11Categories of Charter School Statutes 13Conclusion 18

3. The Capacities Required of Charter Holders 19The Educational Program 19Business Operations 30Governance 35Legal Compliance 39People 44

4. Charter Applicants and Other Actors in the Private Sector 47The Capacity of Charter Applicants 47Other Private Sector Actors: Sources of Technical Assistance,

Professional Expertise and Finance 54

5. Functions and Capabilities of a Chartering Agency 62Chartering Agency Functions 62Required Capabilities 74

6. Advice for Chartering Agencies 79

Figures

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Fig. 2..1. Traditional Public Schools Lack Both Autonomy fromGovernment and Accountability to It 4

Fig. 2.2. Private Schools are Essentially Independent From Governmentand Accountable Primarily to the Market 6

Fig. 2.3. One Trend in Education Reform Promotes Accountability byEmphasizing the Market 7

Fie_ . 2.4. A Second Trend in Public School Reform PrmnotesAccountability through State Standards and Assessments 9

Fig. 2.5. A Third Trend is to Increase the Authority and Responsibility ofIndividual Schools for Decision making 10

Fig. 2.6. The Charter School Concept Balances the Autonomy andAccountability of Individual Schools 12

Fig. 2.7. State Statutes Create Three Categories of Charter Schools 15Fig. 3.1. Important Relationships Among the Educational Program

Descriptions Required by Charter Statutes 21Fig. 3.2. Important Financial Relationships of a Charter School 31

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Tables

Fig. 4.1. Likely Capabilities of Charter Applicants 48

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Summary

The guidebook is designed to help agencies develop their own charter schoolprograms by providing general information on the charter school concept and itsimplementation. It is meant to be one of the first documents charteringagenciesexamine before they decide whether to implement a charter schoolprogram.Chartering agencies should consider the irleac discussed here. end d apt ihnlyt to

their own needs and philosophies of management.

The Charter School Concept

At least twenty five states have passed "charter school" legislation empoweringagencies of state government charged with public education to enter intoagreements with private individuals and groups to operate public schools. Thefundamental framework of the charter arrangement is simple. The charter holderhas a right to implement the school program approved in the charter for somenumber of years. The chartering agency may revoke the charter and close theschool if the charter holder fails to perform.

The agencies with chartering authority vary by state, but include state and localboards of education, special state agencies established solely to implementcharter legislation, state universities and community colleges. The statutes mayallow these agencies to convert existing public schools to charter status or createentirely new public schools. Like other public schools, charter schools may notteach religion or charge tuition, and must respect the right of students enrolled intheir schools to constitutional protections such as due process. The duration ofacharter may be as long as fifteen years, although most run between 3 and 5 years.

As with vouchers proposals, most charter laws introduce the public schoolsystem to a competition for the tax revenues devoted to public education.Charter schools are generally financed by moneys that would otherwise flow totraditional public schools. As schools of choice, charter schools must attractenough parents and students to be financially viable. But charter schoolsare notpublicly-financed private schools responsive only to the market. The boards oftrustees of charter schools are public agents approved by the agency granting thecharter. Charter holders are directly responsible to agencies of state governmentto meet certain student performance requirements; maintain financial viability;

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protect the rights of students, parents and employees; and carry out theeducational responsibilities of state government.

Consistent with state efforts to improve accountability for performance, charterschools must meet educational standards established in the charter schoolstatute, other provisions of the state education code, or the schools' charters. Inmany cases, they are also required to meet approved standards of financialmanagement and comply with processes applicable to government decisionmaking, such as open meetings acts. Should charter holders fail to meet theiragreements, chartering agencies may revoke their charters and close theirschools. But charter schools are also given control over key decisions necessaryto assure the success of the programs they propose.

As under site-based management, decisions at charter schools are made bypeople with a stake in the success of their particular school, but charteringagencies are bound by their agreement to let charter holders implement theirprogram. Absent gross negligence, incipient financial collapse, obvious failure ofthe educational program, or a serious violation of law, charter school operatorshave a legal right to manage their school free of outside interference for the termof their charter. And in addition to allowing existing public schools to convert tocharter status, the statutes often permit private individuals and organizations toestablish entirely new public schools.

Charter School Statutes

No one knows the best mix of autonomy and accountability most likely to createpublic schools that will improve educational performance for large numbers ofstudents. Charter school legislation is based on the proposition that at aminimum, individual schools must: 1) have a right to control some decisionsimportant to the success of their educational program; 2) be responsible togovernment authorities for educational performance and for carrying out aconstitutional trust financed with tax dollars; and 3) be responsible to market andcompetition.

In some states autonomy is confined to the school's educational program. Inthese cases, which include states that only permit conversions of existing publicschools, the statutes give teachers and parents at the school the legal right toimplement a curriculum and instructional strategy approved by the local schoolboard for the term of the charter. In so doing, these charter laws create a sort of"super site-based management." Personnel policy, budgets, and other matters ofschool management remain under the school district's control. In these cases,

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charter schools are accountable for their educational performance. If theprogram fails to improve student outcomes as specified in the charter, the schoolboard may terminate the contract. If the program fails to perform as advertisedto parents, the school may close for lack of adequate enrollment.

In most states, including those that permit the creation of new public schools,charter school autonomy can extend to business decisions, such as the right tohire and fire, contract for goods and services, and lease or purchase real property.In many instances, the chartering agency will negotiate the actual scope ofautonomy with the charter applicant. These "contract schools" are accountablefor ti-Leir performance as ecortathic Cituues as well as for student outcomes. Tne

chartering agency may terminate the charter of a school that fails to maintainfinancial records consistent with generally accepted accounting procedures, andthe school will go out of business if it cannot balance revenues and expenses.

In a few states, particularly those that permit agencies other than local schoolboards to grant charters, charter schools are essentially independent governmentagencies. Here the statutes give charter schools the right to implement theirapproved educational program, control over all economic decisions, and thepowers of a government entity. These "independent public schools" areaccountable for their educational and economic performance, and theiradherence to standards guiding government decision making processes.Chartering agencies may terminate their charters for a failure to conform withgovernment procurement or "open meetings" laws. Schools that violate the lawsgoverning public agencies must bear the costs of defending themselves andcould find themselves bankrupted by lawsuits.

Capabilities Required of Charter Holders

Whatever the scope of autonomy offered by a state's charter school statute, thelegislation generally requires that those holding charters exercise their autonomyresponsibly and that those seeking charters demonstrate their capacity to do so.Depending on the degree of autonomy offered by the statute, charter applicantsmust explain their educational program and means of assessing student learning,provide a multi-year business plan, and describe their governance structure.Once they have received their charter, charter school operators must conform tostate educational standards and tests, permit audits of their financial records byappropriate state agencies, and comply with various state laws governing theoperation of government agencies.

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The Ability to Conceive and Manage an Educational Program

Charter schools have the attributes of several different types of institutions but, attheir core, they are educational programs. The charter approval and oversightprocess requires applicants to satisfy chartering agencies of the quality of theirschool's educational offering. Where charter holders control budgets, the charterschool funding mechanism of per pupil payments demands that the applicantdevelop an educational program sufficiently attractive to parents and studentsfor the school to be financially viable.

Establishing a new school is a demanding task. Applicants must explain andalign the proposed school's mission and goals, student body, curriculum,calendar, assessments, and staff in their proposal. They must assess student andschool performance in ways that meet or exceed state requirements and/or inways that measure achievement under their proposed curriculum. They alsomust be able to hire and develop a staff qualified to deliver the proposededucational program. Once the school is up and running, applicants will have toadminister a school building - schedule classes, assign students, handle childrenand parents, set calendars, deal with problems of student transportation andfood service, and the hundreds of other issues unique to schools.

Charter school applicants must propose an educational vision, curriculum, andinstructional approach that will satisfy both the market and government.Chartering agencies must find the proposed educational program credible toeducators, attractive to parents and students, and economically sound. Toreceive a charter, applicants will have to convince the chartering agency that theyare capable of operating an autonomous public school.

The Ability to Start and Run a Medium-Sized Business

In most cases, statutes give charter holders a broad set of powers necessary tocontrol their fate as independent economic entities. A charter school may receiveand disburse funds, and solicit and accept gifts and grants for school purposes.It may make contracts and leases for the procurement of services, equipment andsupplies. It is permitted to incur temporary debt in anticipation of the receipt offunds. Beyond these specific powers, statutes also often give charter schools allpowers necessary or desirable for carrying out its charter program.

The responsible exercise of this economic autonomy requires substantial business

expertise. Potential charter school operators generally must demonstrate theirbusiness capacity by describing a business or financial plan for the charter schoolin their application.

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Financial planning is a complex and iterative process. Applicants must considerimportant relationships among the charter school's educational program, studentenrollment, revenues, building, special education needs, and staff. Theeducational program should be designed with a potential student market inmind, including a particular type of student (i.e., at risk, mainstream, etc.) and aparticular number of students. The program and the type and number ofstudents will generate requirements for specific educational materials andteaching qualifications, and possibly particular facilities.

Student enrollment will determine the revenues generated by the school. ThoseoyaA.c ILVDCIL C1J CI IC DLLLUOi

location (including any renovations that may be needed to make the spacesuitable for use as a school, as well furniture and equipment), and to pay the staffnecessary to carry out the chosen educational program and operate the charterschool. The building should be located somewhere safe and convenient to attractthe required enrollment and desired staff.

The building, the staff, and the educational program will have to accommodatestudents with special education needs. Some - but by no means all - of theadditional costs of these students will be offset by additional revenues receivedfor special needs, so the school's general revenues must be sufficient toaccommodate special education.

Before granting a charter, chartering agencies must be convinced that thefinancial aspects of each of these factors add up to an economically viable charterschool. Moreover, they must have some confidence that after the charter isgranted, the applicant will be able to execute that plan, start up the school, andmanage an ongoing business operation.

The Ability to Operate Within a Complex Governance Structure

In many cases charter schools have a legal identity independent of the district inwhich they are located. Subject to the school's charter and the provisions of thecharter statute, they are governed by a board of trustees who have the authorityto decide matters related to the operation of the school. But while charter schoolsmay be independent of local school boards in the sense that they have the right tocarry out the educational program contained in their approved charter, to hirefire and manage the personnel employed by the school, to employ the financialresources available to the school, and to enter into contracts for real property,goods and services for school purposes, their autonomy is constrained by statuteand their relationship with their chartering agency.

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Charter statutes often require applicants to explain how they will be accountableto parents, and the proposed governance structure of the charter school,including a description and method for the appointment or election of membersof the board of trustees. Once a charter school is in operation, it often will besubject to the state open meetings requirement government procurement law andmyriad other regulations. Chartering agencies must assure themselves that theproposed governance structure meets the requirements of state law and can beimplemented by the applicant.

The Ability to Comply With the Laws Controlling Agencies ofState Government

Charter schools are typically characterized as highly flexible and autonomousinstitutions, operating free from government regulation. In most cases, it is moreaccurate to say that charter schools are free to determine how they will complywith a wide variety of state and federal laws. As a general principle, charterschool s are required to comply with all Federal and state laws, rules andregulations pertaining to public schools, except where compliance is waived inthe act or at the discretion of another state education agency. Charter schools areoften subject to considerable portions of the state education code, includingteacher certification, special education, the rules governing the applicationsprocess, admissions, facilities, and charter school governance, the prohibition onsectarian operations, charter school liability and immunity, studenttransportation, audits, civil rights, and employees. Chartering agencies shouldrequire that applicants are familiar with these laws and demonstrate a capacity tosatisfy compliance requirements in a broad range of situations.

The Capacity of Likely Applicants

Depending on the statute charter applicants may include higher education andcommunity service institutions, national and local private businesses engaged ineducation, grassroots groups of educators, parents and activist citizens, andexisting public and private schools seeking conversion to charter status. Thegroups will differ in motivation, the size and locations schools of the schools theypropose, and in the types of students they hope to serve.

Both market forces and the accountability to government agencies demanded inreturn for the autonomy offered by charter school laws may require that charteroperators possess the widest range of capabilities. They need expertise ineducational programs and school administration - including special education,

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business management, and government operations. They must have theadministrative capacity to weave this expertise into a viable proposal, and later awell-run school. In many cases they will require access to facilities. They musthave some financial backing to hire staff, buy equipment and purchaseeducational materials before they open their doors, and to lease or purchase andthen renovate real estate. They need strong relationships with communityinstitutions, including local banks, newspapers, and government. They need thecommunity's good will.

71.1 " V1111111 "VI AIM All: A ANIA.. AMA. W.A.. AA. lb A .1.6,...111016.14.17

To fulfill the purpose of the charter act and assure the success of their ownprograms, agencies first need to provide public notice of their intent toimplement the charter school statute. They then must review applications andapprove charters. After approval, they need to monitor the operations of charterholders. In the course of establishing the first charter schools, agencies shouldconsider providing both technical assistance to applicants and contract servicesto charter operators. Once schools are up and running the charter agency willhave to work with other agencies and the private sector to create a supportiveoperating environment. Where charter holders cannot meet performancerequirements, chartering agencies have the responsibility to terminate theircharters.

Inform the Public

Because the statutes generally place chartering agencies under no obligation togrant charters, the first function of a chartering agency is to provide notice of itsintent to implement a charter school program. Announcements should indicatethe agency's general implementation strategy, for example to make a good faitheffort to approve unsolicited charter applications, seek out partners to developsome number of new schools, or approve certain kinds of educational programsor schools for certain categories of students.

Chartering agencies should develop a formal Request for Proposals (RFP). TheRFP should describe the process the agency will follow in its decision making,including the chartering process and timetable, important deadlines, decisionprocedures, and the rights and obligations of eligible applicants. It shouldcontain a copy of the application form and identify the criteria that will guideagency judgments.

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Review Applications and Approve Charters

The chartering agency's next function is to review and approve charters. Toperform this function, the agency needs to develop an approval process;chartering criteria; and the flexibility to employ the process in ways that honorthe agency's public trust responsibility to children, promote the practice of duediligence by agency personnel, and are faithful to the agency's good faithdecision to implement the charter statute.

The chartering process must permit sufficient time for the agency to conduct athorough investigation of applications and applicants, for applicants to make anyappeals offered by state law, and for those granted charters to open their doors tostudents in time for the upcoming school year. In many cases a basic timetablewill be mandated by the charter statute.

Formal hearings on charter applications, including presentations by theapplicant, are often required by law. Agencies must allow applicants to presentthemselves to the public, permit public comment on the application, and providea public record of their chartering decision making.

Chartering criteria are stated or implied by the statute and informed byprofessional knowledge of the substantive area in question. Information thestatute requires applicants to provide in their application and the scope ofautonomy offered to charter holders in the charter law serve as bases for thedetermination of criteria. The scope of autonomy offered by the statute impliessubstantive criteria for charter approval.

The agency's flexibility in carrying out the review and approval process andapplying its criteria will strongly influence its ability to implement a charterprogram and fulfill the agency's intent. The practice of due diligence by agencypersonnel involves looking for a basis to approve innovation as well asdisqualifying faults.

Provide Technical Assistance to Applicants

In many cases, charter statutes permit or require chartering agencies to provideassistance to charter applicants. In an ideal world the technical assistanceprovided by chartering agencies to charter applicants would not go muchbeyond the information contained in the RFP and informal discussions withapplicants. In practice, the world of charter review and approval is not ideal,particularly when the charter law has just been passed and the charter programis first implemented. Chartering agencies will sometimes be in the best position

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to render substantive technical advice to potential applicants. Refusing to giveadvice in these areas of expertise may retard the development of charter schools.

Nevertheless, there are lines charter agencies should not cross. They should notwrite an applicant's proposal. The more substantive advice an agency supplies,the less confident it should be in the applicant's capacity to operate the proposedschool.

Monitor Charter School Operations

Once charters have been granted, the chartering agency's responsibilities shiftfrom the quality of an application describing a proposed school, to theimplementation of the approved plan and the performance of the operationalschool. The nature and extent of oversight should depend on the scope ofautonomy offered to charter holders by statute, reporting and inspectionrequirements contained in the charter law, similar requirements charter schoolsmay be subjected to under categorical grants and special state programs, andbenchmarks established in the application Agencies need sufficient informationto provide warning of potential crises but must not unreasonably burden charterholders or deprive them of the discretion they need to implement their approvedcharter.

Charter operations are monitored by three means: written reports provided bycharter holders, inspections conducted by chartering agencies, and investigationsof informal and formal charges of violations of law. Chartering agencies need tocreate systems to manage each of these oversight mechanisms .

Reports

The broader the scope of autonomy offered to charter holders, the broader theprobable array of reporting requirements established in the charter statute. Moststatutes require charter holders to produce some form of annual report and tosubmit certain other reports on forms supplied by state agencies. Problemscanarise when chartering and other education agencies with oversightresponsibilities for charter schools hold charter operators to precisely the sameregulations as the traditional school system managed by school districts. Theregime is likely to overwhelm the small administrative staffs of charter schools.

Chartering agencies should consider three ways of addressing excessivebureaucracy in the oversight of charter holders. The first is to make use of themanagement information systems that charter holders must employ to controltheir school's operations. The second approach is for the chartering agency to

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make the best use of information charter holders are already required to produceby law or circumstances, instead of adding new government reportingrequirements. The third approach is to streamline existing regulation.

Inspections

Many charter statutes prohibit charter holders from interfering with inspectionsby chartering agencies and other government agencies whose responsibilitiesencompass charter schools, and give those agencies relatively unrestricted accessto charter schools and their records. Inspections of physical facilities and recordsare a necessary component of any complete audit. Charter holders should bemade aware of the purpose of the audit, the information required, the peoplewho should be made available to the inspection team, and the length of theinspection.

Investigation of Reported Violations

As a rule, chartering agencies do not have substantial personnel resources todevote to the oversight of charter schools and rely on reports of potentialproblems from third parties. In some cases, charter statutes specify proceduresfor dealing with grievances with charter schools.

Chartering agencies need to create formal systems for reporting andinvestigating violations of charter law. In the event of an investigation, theagency should give charter holders notice of the complaints made against them,the status of investigations, an opportunity to address the matter, and the right todefend themselves before the agency makes any formal decision or takes actionthat jeopardizes the charter holders' interests or status.

Create a Supportive Operating Environment

Charter schools may be more or less autonomous, but all exist within - and tovarying degrees rely upon - a larger system of public education. Regardless ofthe scope of their autonomy, all require that system to provide a supportiveoperating environment.

Where local school boards are the chartering agencies and the charter statuteextends autonomy only to the implementation of an approved educationalprogram, a charter school's success will be influenced by personnel and budgetdecisions made by the central office, the superintendent, and the school board.Where the charter law allows a district to expand the scope of autonomy to theeconomic arena, the charter school may still depend on the district for payrollservices, food service, and collective bargaining. Even where the charter school

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is chartered by an agency other than a school board, the school may rely on thedistrict for transportation services, and will have important relationships with arange of state education agencies in addition to the chartering agency.

Having chartered a school, chartering agencies have an obligation to make theirbest efforts to see it succeed. Where they control aspects of the charter school'soperating environment that are essential to its ultimate success, charteringagencies should act in good faith to support the school. Where charter schoolsare more independent of school districts, but subject to reporting requirements tostate education agencies or fall within their jurisdictions, chartering agenciesmist be prepared i0 alias advocaies ior charter schools.

The operating environment of charter schools with control over economic andbusiness decisions includes the private sector, and particularly private lenders.Charter agencies should be prepared to grant contingent charters, subject to theholder obtaining an appropriate facility, to help otherwise qualified applicantsobtain the financing they need to purchase and/or renovate a school building.

Provide Contractual Services to Charter Holders

By mutual agreement of the parties or as required by the charter law, charteringagencies may also provides services to charter holders. Where charter schoolsare not required to contract with chartering agencies for services, they willquickly learn whether they are receiving value for money and seek alternativesas soon as they are able. But even where the agency receives a fee determined bythe charter statute, for example as a portion of the charter school paymentretained for oversight or rent, its good faith promise to support a charter schoolssuccess should dictate that the agency give the best service possible.

Terminate and Renew Charters

Where charter holders are unable to make meaningful progress towards theireducational goals, schools skirt insolvency, or a pattern of serious violations oflaw is uncovered, statutes give chartering agencies the right to terminate thecharter, and close down the school or turn it over to new management.Chartering agencies also have the right not to renew charters when they expire.Where reasonable administrators of charter programs would agree that a schoolis a failure, charters should be terminated or not renewed for the good ofstudents, to protect the taxpayers, and to send a signal to other operators.

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In an ideal world the threat of termination or nonrenewal should be an effectivedeterrent to poor management. In the real world, they are difficult threats tocarry out. Chartering agencies need oversight systems that establish clearwarning to charter holders of a need to address specific problems before theygrow to threaten the viability of the school or rob it of vitality .

At least during the early implementation of charter school programs, agenciesshould also provide direct assistance to problem schools. This approach isconsistent with the fact that at this stage charter programs are experiments. Asthe agency becomes more experienced and charter schools more numerous, itshould be able to keep unqualified applicants out of the charter school programand rely more on intermediate sanctions, but direct assistance should never beruled out as an option. Before a charter is terminated, chartering agencies shouldbe able to point to a history of warnings, sanctions and assistance to addressproblems that ultimately led to failure.

The Capabilities Required of Chartering Agencies

Chartering agencies require substantial capabilities to carry out the functionsdiscussed above. They need detailed knowledge of the charter statute andrelated state and federal law. They must have access to functional expertise tojudge quality of applications and operations. They must appreciate issuesrelated to the implementation of charter legislation in other states. Charteragencies need to establish relationships with other government agencies,technical assistance organizations (TAOs), foundations interested in the charterconcept, and the banking community. And finally, they require the trust ofcharter applicants and charter holders.

Detailed Knowledge of the State Charter School Statute andRelated State and Federal Education Law

The starting point for all chartering agency functions is the law. The members ofchartering agencies must master the various provisions of their state's charterschool statute. In addition, agency staff need to become familiar with importantaspects of state education law relevant to charter schools and agency oversight ofcharter programs. Staff should understand federal education law, includinglegislation creating the various categorical programs and grants, and theadministrative procedures governing their distribution. They should knowwhether charter schools are located in jurisdictions subject to desegregationorders or consent decrees. They may also need a general awareness of, and

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access to specialists in, other state law, including government contracting,

liability and insurance, labor relations, building and zoning codes, and privatesector finance. Where charter approval and termination are subject to statestatutes governing the decisions of administrative agencies, agency staff musthave a firm grasp of the procedural and substantive requirements of that body oflaw

Functional Expertise to Judge the Quality of Charter Applicationsand Operations

The chartering agency's capacity to implement the charter statute depends on anappropriate number of adequately trained personnel. Personnel training mustmatch the scope of autonomy offered to charter schools by the statute. Personnelnumbers depend on the number of charter applicants and holders, the timeallotted for administrative processes, and the amount of evidence necessary forthe chartering agency to make effective decisions. Whether these personnel arefull-time staff, consultants, volunteers, or supplied under contract by a firmretained to perform specific analyses or review the entire application is up to thechartering agency.

An Appreciation of Implementation Issues in Other States

Understanding the implementation problems faced by different types of charterapplicants in different states, the status of issues faced by every applicant inevery state, the alternative approaches to their resolution of these problems, andreviewing their relevance to implementation of the new charter law, should be ofhigh priority. To obtain and maintain this understanding the agency mustengage in outreach activities. It needs to establish strong working relationshipswith chartering agencies in other states. It should keep informed on the work ofnational education reform networks and access informal charter school groupson the Internet. It should build ties to policy analysts interested in charterschools and operating at the local, state and national levels. The agency shouldbecome involved with the various regional and national conferences sponsoredby those who make up the nascent charter school movement. And it shouldconsider sponsoring research on the problems of early implementation of charterprograms.

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Relationships with Other Government Agencies, TechnicalAssistance Organizations, Foundations, Professionals and theBanks

Chartering agencies have the power to give applicants an opportunity to createpublic schools, but the contractual relationship between chartering agencies andcharter holder is only one of many necessary to the success of a charter program.Under most statutes, charter schools operate within a larger environment ofgovernment regulation and private sector support. Chartering agencies need toestablish their own relationships with these actors.

Other government agencies, which may be skeptical about or unfamiliar withcharter schools. Where a good faith commitment to work the charter problemhas been made by a sister agency, the development of a positive relationshipdepends on the chartering agencies willingness to provide staff assistance.

Technical Assistance Organizations, which represent the interests of charterapplicants and others who favor the establishment of charter schools. Charteringagencies should to initiate discussions as soon as they decide to go ahead with acharter program, solicit TAO input while the program is being designed, andshare appropriate information with the TAO as a matter of course.

Foundations, which can provide resources to fill critical gaps. While designingtheir charter program, agencies should work with the foundations to identifyparticular needs private philanthropy might fill. Foundation support for studiesof implementation issues in other jurisdictions; workshops and trainingmaterials; and the development of technical expertise to support agencies reviewand approval of charter applications might be particularly helpful.

Banks and professionals, whose support will be essential where charter schoolsare autonomous economic entities. Beyond announcing an intent to go aheadwith a charter program, agencies should invite members of the private sector toparticipate in the design of the charter program and any workshops or trainingsessions the agency offers.

The Trust of Potential Charter Holders

Without the trust of individual charter applicants and holders the agency cannotimplement a successful charter program. Before qualified applicants will makethe very substantial investments required to start a charter school, they mustbelieve that the agency is committed to making the charter program work andwill make its best efforts to create a supportive operating environment for their

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new schools. Applicants and holders need to know that a chartering agencywants the charter program to work, and will make its best efforts to work with acharter holder genuinely trying to create an effective school. Agency staff willrequire strong interpersonal skills.

Advice for Chartering Agencies

1. Undertake a serious study of the requirements before deciding to implement acharter program.

2. Do not implement a charter program unless you are prepared to make yourbest efforts to see it succeed.

3. Invest in expertise equal to the scope of autonomy the charter statute offers tocharter holders.

4. Be prepared to render technical advice.

5. Remember that it is easier to weed out problem applicants than to deal withproblem charter holders.

6. Give equal weight to people, the program and the implementation plan.

7. Recognize that due diligence requires looking for reasons to take a chance aswell as reasons to disqualify an applicant.

8. Give applicants as much autonomy as they can handle, but not much more.

9. Create an oversight process with intermediate standards of performance andsanctions.

10. Develop strong working relationships with other actors in the charter schoolsystem.

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Acknowledgments

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1. Introduction

This document is a guidebook for chartering agencies. It is aimed at educationagencies considering how to exercise the authority given to them to allow privateindividuals and groups to operate public school under state charter schoollegislation. The document provides basic information on the charter schoolconcept, the capabilities required of successful chartercharter crhool operators. typesof applicants and other private sector actors the chartering agency is likely toencounter, the functions of a chartering agency, and the capabilities required tocarry out those functions. It is intended to help agencies develop their owncharter school programs by providing general information on the charter schoolconcept and its implementation. The guidebook is meant to be one of the firstdocuments chartering agencies examine before they decide whether toimplement a charter school program.

Section 2 explains the charter school concept in the context of other legislativeapproaches to public school reform, describes the basic features of charter schoollegislation, and outlines the basic types of charter school statutes. The sectionpresents a framework for analyzing recent legislative proposals for educationreform based on two factors: 1) the autonomy of individual schools fromgovernment control over decisions essential to their success as educationalprograms; and, 2) their accountability to government for performance. Usingthis framework , the section compares the statutory basis of traditional publicschools, private schools, voucher programs, state standards and assessmentsprograms, and site-based management with that of charter schools. It thendescribes the basic bargain of charter school law - autonomy from governmentcontrol over decisions in return for accountability to chartering agencies foroutcomes, and outlines the basic types of charter statutes.

Section 3 discusses the capabilities required of charter holders. No one knowsthe mix of autonomy and accountability most likely to create public schools thatwill improve educational performance for large numbers of students. Charterschool statutes may permit charter holders to control the implementation of anapproved educational program, economic resources, and the decision processesof government agencies responsible for public education. The responsibleexercise of this expanding scope of autonomy requires that charter holders haveexpertise in curriculum, assessment and school administration, business andfinancial management, and a wide range of laws governing public institutions.

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The section describes each of these capabilities in some detail, to serve as a basisfor the development of criteria for charter approval.

Section 4 describes the interests and capabilities of different types of charterapplicants and other private sector actors involved with charter schools. Noapplicant will fit neatly into a pigeonhole, but chartering agencies should beaware of basic tendencies. Depending on the charter statute, institutions ofhigher education; community service organizations; grassroots groups ofparents, teachers and citizens; profit seeking firms; existing public schools andexisting private schools may be permitted to hold charters. Each has its owninterests in the charter option, programmatic focus, and capacities. In addition,charter applicants and holders may become involved with nonprofit technicalassistance organizations (TAOs) established to help implement the charterstatute; associations of charter holders; private lawyers, accountants, andconsultants with professional expertise relevant to charter applications andoperations; and private sources of finance to fund various "start-up" costs.Chartering agencies should be aware of the interests and capacities of each ofthese groups and understand their potential influence on charter programs.

Section 5 explains the basic functions of a chartering agency and the capabilitiesrequired to carry them out. Agencies need to consider how they willcommunicate their intent to implement the charter statute; create systems forreviewing and approving applications, and monitoring charter implementation;provide certain technical advice to applicants and contract services to charterholders; help to create an environment that supports efficient charter schooloperations; and devise means for dealing with problem schools, includingdecisions to terminate or not renew charters. To carry out these functionsagencies will need detailed knowledge of the charter statute and related state andfederal law; functional expertise to judge quality of applications and operations;an appreciation of issues related to the implementation of charter legislation inother states; relationships with other government agencies, TAOs, foundationsinterested in the charter concept, and the banking community; and the trust ofpotential charter holders

Section 6 concludes the report with some basic advice for members of charteringagencies to keep in mind as they design and implement their own charter schoolprograms.

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2. The Charter School Concept

Members of chartering agencies are undoubtably familiar with recent critiques ofpublic education that lay much of the blame for inadequate student performanceon the traditional system of public education. These arguments fault: 1) anorganizational structure that controls the operation of individual schools througha hierarchy of school district central offices, siinerintcneiPri-c, crl-trIrti hrertrAc, state

and federal education agencies, and a parallel hierarchy of teachers unions, atevery level more removed from the needs of students in the classroom; 2) a vastarray of laws, rules and collective bargaining agreements implemented through

these hierarchies that tend to stifle innovation; and 3) the lack of criteria andprocedures which make it difficult for taxpayers, acting through theirgovernment, to hold public schools accountable for results or improve theirperformance. True or not, this assessment has resonated with citizens, legislatorsand governors in many states, prompting proposals for legislative reform of thepublic school system including the establishment of state-wide learningstandards and assessment, granting state education agencies the right tointervene in failing districts, creating voucher programs that turn over thefunction of public education to private schools, giving local boards the power todecentralize through site-based management, and now the creation of "charterschools."

This section is intended to help the members of chartering agencies understandhow the charter school concept fits within this broad argument for change in thelegal structure of public education.1 By comparing the legal status of public andprivate schools, the section describes an analytical framework that addressesconcerns about the autonomy of individual schools from direct governmentcontrol and the accountability of public schools for educational performance.

The section first discusses the traditional system in the context of this frameworkand then the reform proposals to improve state standards, create vouchers,

increase site-base management, and develop charter schools. Finally, it discussesbasic types of charter school statutes.

1 This section is based on and extends, Marc Dean Millot, What are CharterSchools?, LJW/RAND Program on Reinventing Public Education, University ofWashington (Seattle), April 1995.

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Traditional Public Schools

Individual public schools have no legal status independent of the districts wherethey are located. Schools are simply convenient administrative elements of theschool district. Traditional public schools are operated under the direction of thelocal school board, the district superintendent, administrators in the schooldistrict's central office, and very often the terms of collective bargainingcontracts. Individual schools lack control over matters essential to theirachievement as educational institutions. Parents, teachers and even the principalhave virtually no power to decide matters critical to their school's success. (See

Fig. 2.1.)

Fig. 2..1. Traditional Public Schools Lack Both Autonomy from Government andAccountability to It

High

Accountability

to Government

Low

Tr itional School

Low High

Autonomy from Government

Traditional public schools are often swamped in rules, bureaucracy, andcontracts imposed from above. They carry out an educational programestablished by the district for students allocated to the school by the district.They do not control the financial resources actually consumed at the site tooperate the school, they have virtually no authority to contract for goods andservices, they have no significant control over the school's personnel, and theyhave no control over the level of funding the district will allocate.

5

While districts are accountable to other government agencies, the electorate, andto the public at large for their financial management, personnel decisions,

admissions policies, and decision processes, the individual public schools withindistricts have had no separate accountability. Until fairly recently, there havebeen no standards for the performance of individual public schools, no seriousefforts to assess their performance, and no negative consequences for principalsand staff when they fail.

Laboring under the central control of state and district education agencies andsubject to the constraints of state civil service regulations and district-wide

OC1.1.1le. VViii

great effort a few special schools may be separated from the system, but on thewhole, individual schools find it hard to meet the particular needs of students intheir communities. Beyond the small number of exceptional schools, parentshave few real options as to the type of public school they may choose to sendtheir children. With no competition from other school operators for the taxdollars raised to educate the vast majority of children, school districts and theindividual schools within them lack a powerful incentive to improve. Andbecause most schools lack the autonomy necessary to break away from the normand provide an educational program tailored to their students' needs, it isarguably unreasonable to hold them accountable for their educationalperformance.

Private Schools

Dissatisfaction with the position of the traditional public school leads naturally tocomparison with private schools. Where individual public schools are merelyadministrative units of a larger school district, private schools are independentlegal entities. Decisions essential to the success of the private school are

controlled by the private school. It determines the educational program it willoffer and the kinds of students it will serve, controls the resources consumed atthe site, contracts for goods and services, and has the final say in personnelmatters. The private school is guaranteed no particular level of funding, but it isfree to charge tuition and to attract as many students as it chooses. In short, theprivate school operates in a market. (See Fig. 2.2.)

The autonomy offered by the marketplace has powerful effects on the scope andnature of private education. Parents with adequate resources and private donorscan choose from a wide variety of schools with distinctive educational programs.The competition for tuition-paying students and donations, and the prospect ofgoing out of business, provides private schools with strong incentives to satisfy

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their communities, continuously improve their educational offerings, andmanage their resources wisely. Schools able to master the challenge thrive, thosethat do not go out of business.

Fig. 2.2. Private Schools are Essentially Independent From Government andAccountable Primarily to the Market

High

Accountability

Tradition

Low

Low

AutonomyHigh

But because they are formed by private initiative, are not government programs,and do not rely on public funds, private schools are not very accountable togovernment, the taxpayers, or the public at large. They are generally subject toan absolute minimum of state regulations. They may teach religion, discriminatein admissions on a wide range of criteria not available to a school district, andcharge tuition. And independent private schools are under no special obligationto government for their level of educational performance, sound financialmanagement, or fair and equitable decision processes. They are accountable onlyto the marketplace - to parental choice and their own capacity to manageresources.

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Voucher Proposals

Some proposals to reform public school systems that follow from a comparisonof public and private schools emphasize school autonomy from government, andwould create a competition for the tax dollars devoted to public education. (SeeFig. 2.3.) Voucher proposals allow private schools to compete with schooldistricts for a share of federal, state and local budgets devoted to publiceducation? They also shift more responsibility for public education to parents byallowing them to choose their children's' schools.3

Fig. 2.3. One Trend in Education Reform Promotes Accountability by Emphasizing theMarket

High

Accountability

Tradition

Low

Autonomy

High

A state's right to permit tax dollars to flow to sectarian schools has not been fullyresolved, but a state can impose conditions on voucher payments, requiring

2 John E. Chubb and Terry M. Moe, Politics, Markets and America's Schools, The

Brookings Institution (Washington, D.C.), 1990.

3 See RCW 28A.200 ("Home-Based Instruction").

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private schools to accept some number of low income students or implementadmissions standards dictated by the state, and prohibiting them from acceptingtuition payments above the voucher or affiliating with a religious institution.Acceptance of these conditions does not transform private schools into publicschools, nor does the receipt of public funds transform a private school's board ofdirectors into public officials. Vouchers privatize public education by allowingprivate schools, funded with tax dollars, to meet the state's obligation to educateits children.

Private schools that accept vouchers are accountable to government to meet theminimum health, safety, civil rights and educational requirements established forprivate schools, and voucher legislation may add new requirements, but voucherproposals rely primarily on the market for accountability. They do not permitthe government to condition state payments on the educational performance orfinancial stability of the private school, or on the fairness and openness of itsdecision processes. Vouchers replace direct government control with marketforces (e.g., parental choice, marketing talent and managerial capacity) to assurethat individual schools are accountable for educational performance. Schoolsthat satisfy parents and keep revenues ahead of expenses stay in business, therest fail.

State Standards

A second set of proposals address the state's responsibility to assure that eligiblestudents receive an adequate education by increasing accountability foreducational performance at every level of the public school system. Morestringent requirements for teacher certification, performance-basedsuperintendent contracts, state standards for student performance in keysubjects, the development of more authentic student assessments, comparativereports of overall student performance in district schools are some of the featuresof this approach. For example, Maryland's School Performance Programlegislation permits the state to take over a school, or even a district, that fails tomeet minimal performance standards.4 These proposals set criteria forevaluation and penalties for failure, but do not address school autonomy orimprove the ability of individual schools to determine and take actions necessaryto assure a successful educational program. The schools remain subject to school

4 See Section 13A.01 of Code of Maryland Regulations.

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board decisions, district and state regulations, civil service rules and unioncontracts. (See Fig. 2.4.)

Fig. 2.4. A Second Trend in Public School Reform Promotes Accountability throughState Standards and Assessments

High

Standards/Int ention

Accountability

Tradition

Low

Maryland School

Performance Program

Low HighAutonomy

Site-Based Management

A third legislative approach begins to move more of the responsibility andauthority for education policy from the state and the district to the individualpublic school. Statutes authorizing districts to permit site-based managementand shared decision-making, including Washington state's "pilot programs inschool based management"5 and its' six-year legislative experiment with "21stCentury Schools"6, allow parents, teachers, and other school workers toparticipate with the principal in the development of a proposed schoolimprovement plan, approved by the district authorities. (See Fig. 2.5.)

5 RCW 28A.240.

6 RCW 28A.630.100-295. By statute, the program ended in June, 1994.

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Fig. 2.5. A Third Trend is to Increase the Authority and Responsibility of IndividualSchools for Decision making

High

Accountability

Tradition

Low

AutonomyHigh

Under site-based management, the school site team is givena measure offreedom from the district's direct control and must satisfy the local school boardwith its subsequent performance. The improvement plan generally covers arelatively narrow range of education policy, typically related to the developmentof instructional programs consistent the district's curriculum. The team may alsocontrol a very small budget sufficient for materials and the teacher release timenecessary to develop the plan.

But the independence of the site team is compromised in several ways. Theprincipal remains legally responsible to the superintendent to represent thedistrict and carry out its policies, and the teachers are bound by their unioncontract and membership obligations. After the school board approves theteam's plan it is under no legal obligation to the team to carry out that decision,and may subsequently modify or reverse its decision at its own discretion. Thesite team may or may not oversee implementation of the plan, but in any case theteam does not control the school. Its authority is constrained by the principal'sresponsibilities to his superiors, the activities of the central office, and the schoolboard's responsibility to approve the team's actions.

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Moreover, the site team must act within the confines of existing state laws andregulations, district policy, or union contracts, absent specific waivers from thestate, district or union. Waivers of state law are often held by the district andwaivers of district and union rules are often obtained by informal means. Theteam has little in the way of procedural or substantive rights to prevent thearbitrary withdrawal of these waivers by district or union officials. Site-basedmanagement depends largely on the political will of "higher -ups" with legalauthority for operation of the school system.

In addition, the accountability of site teams is generally weak. While provisionspermuting site-based mailageffteili. are sometimes passed as part of legislativereform packages that include the state-wide standards and assessments

discussed above, the legislation generally does not explicitly condition siteautonomy on educational performance. Nor are site teams accountable to themarket. As with traditional public schools, the operations of those practicingsite-based management are dominated by political and bureaucratic dynamics.They will be assigned what the superintendent and central office determine to betheir fair share of the districts student population and receive what thesuperintendent and central office consider to be an commensurate level offinancial, human and other resources - subject to school board intervention.

Charter Schools

The charter school concept combines proposals to increase individual schoolautonomy with efforts to create high levels of public school accountability. Inmany ways it is a logical extension of site-based management. But the conceptuses both government oversight and market mechanisms to foster school-levelaccountability.

At least twenty five states have passed "charter school" legislation empoweringagencies of state government charged with public education to enter intoagreements with private individuals and groups to operate public schools. Thefundamental framework of the charter arrangement is simple. The charter holderhas a right to implement the school program approved in the charter for somenumber of years. The chartering agency may revoke the charter and close theschool if the charter holder fails to perform. (See Fig. 2.6.)

The agencies with chartering authority vary by state, but include state and localboards of education, special state agencies established solely to implementcharter legislation, state universities and community colleges. The statutes allowthese agencies to convert existing public schools to charter status and often to

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create entirely new public schools. Like other public schools, charter schoolsmay not teach religion or charge tuition, and must respect the right of studentsenrolled in their schools to constitutional protections such as due process. Theduration of a charter may be as long as fifteen years, although most run between3 and 5 years.

Fig. 2.6. The Charter School Concept Balances the Autonomy and Accountability ofIndividual Schools

Accountability

High

AccountabilityThreshold:

CharteringAgency May

Revoke Charterfor Failure to

Perform

Low

Autonomy Threshold:

Charter Holder has Legal Right to ImplementProgram for Duration of Charter

Autonomy

Charter schools are generally schools of choice - in most states students may notbe compelled to attend a charter school. As a rule, charter schools are funded onthe basis of student enrollment, with the schools receiving a proportionate shareof the basic and categorical funds allocated to public education by federal, stateand local government. Financing and choice make charter schools responsive tomarket forces.

Like vouchers, charters introduce the public school system to a competition forthe tax revenues devoted to public education. Charter schools are financed bymoneys that would otherwise flow to traditional public schools. As schools of

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choice, charter schools must attract enough parents and students to be financiallyviable. If enough charter schools are successful the rest of the public schoolsystem will have to respond to market pressures by offering equally attractiveprograms. But charter schools are not publicly-financed private schoolsresponsive only to the market. The boards of trustees of a charter school arepublic agents approved by the agency granting the charter. Charter holders aredirectly responsible to agencies of state government tomeet certain studentperformance requirements; maintain financial viability; protect the rights ofstudents, parents and employees; and carry out the educational responsibilitiesof state government.

Consistent with efforts to improve accountability for performance, charterschools must meet educational standards established in the charter school statute(which often incorporate the statewide standards and assessments contained inprior reform legislation), or the schools' charters. In many cases, they are alsorequired to meet approved standards of financial management and comply withprocesses applicable to government decision making, such as open meetings acts.Charter school applicants must justify their proposed program to educationagencies of the state before receiving their charter. Should charter holders fail tomeet their agreements, chartering agencies may revoke their charters and closetheir schools. But charter schools are also given control over key decisionsnecessary to assure the success of the programs they propose.

As under site-based management, decisions at charter schools are made bypeople with a stake in the success of their particular school, but chartering

agencies are bound by their agreement to let charter holders implement theirprogram. Absent gross negligence, incipient financial collapse, obvious failure ofthe educational program, or a serious violation of law, charter school operatorshave a legal right to manage their school free of outside interference for the termof their charter. And in addition to allowing existing public schools to convert tocharter status, the statutes often permit private individuals and organizations toestablish entirely new public schools.

Categories of Charter School Statutes

The "basic bargain" between chartering agencies and charter holders embodiedin charter school statutes is "autonomy for accountability." Chartering agenciesmay give new or converted charter schools control over a set of decisions thelegislature has deemed essential to their success as educational institutions.Charter holders obtain a legal right to implement the program embodied in theircharter without interference for the term of their charter. In turn, they are

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accountable to the chartering agency for their performance. Charter holders arealso accountable to the market, because their viability depends on their ability toattract students and manage resources.

No one knows the mix of autonomy and accountability most likely to createpublic schools that will improve educational performance for large numbers ofstudents. Charter school legislation is based on the proposition that at aminimum, individual schools must: 1) have a right to control some decisionsimportant to the success of the educational program for some number of years; 2)be responsible to government authorities for educational performance and forcarrying out a constitutional trust financed with tax dollars; and 3) be responsibleto market and competition.

Each state has elaborated on this theme in its own way; no two charter schoolstatutes are exactly alike. Nevertheless, a review of the first 15 statutes suggeststhat they create three basic categories of charter schools: "super site-basedmanagement", "contract schools", and "independent public schools."7 (See Fig.2.7.)

Super Site-Based Management

In some states, the scope of a charter school's autonomy is confined to theeducational program. Examples of this modest extension of site-basedmanagement are offered by such states as New Mexico and Georgia. Thesestatutes generally only empower school districts to approve the conversion ofexisting public schools to charter status. Charter approval gives a small pool ofprivate individuals - teachers and parents at an existing public school - the rightto carry out their proposed curriculum and instructional strategy for the term ofthe charter. In some instances, the charter holder is given a blanket exemptionfrom those portions of the education code relating to such matters as curriculumrequirements and the length of the school day and year. In others, the charterapplicant must identify those portions of the code that constitute an obstacle tothe proposed educational program and justify each waiver.

Under this approach, the charter holder's control of the converted school islimited to those decisions directly related to the implementation of the approvedplan describing curriculum and instructional strategies. Personnel policy,

7 Marc Dean Millot, Autonomy Accountability, and the Values of Public Education,

UW /RAND Program on Reinventing Public Education, University ofWashington (Seattle) , September, 1996.

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budgets, and other matters of school management remain under the schooldistrict's control. Although charter holders have the right to carry on with theireducational program for the term of their charters, charter schools operatedunder the "super site-based management" option have no legal significanceindependent of the school district. The school remains an administrative unit ofthe district, subject to school board decisions on such critical matters as personneland budgeting. The school district remains the public employer for the purposesof collective bargaining and the teachers at the school continue to be part of thedistrict bargaining unit.

Fig. 2.7. State Statutes Create Three Categories of Charter Schools

autonomy Threshold:

Charter Holder has Legal Right tologleeent grog.. for Term of Charter

Where charter school autonomy focuses on curriculum and instructionalstrategies, accountability is confined primarily to educational performance. But,even where the scope of autonomy is so narrow, charter schools are accountableto both government and the market. If the charter holders are unable to balancethe capacities of the existing teaching staff and the few resources they do control(such as their own time, or the school's small materials budget), against thedemands of the student body and the educational program, they may fail toimplement the program or meet the performance expectations of parents and theschool board. If the program fails to perform as advertised, the school will lose

BEST COPY AVAILABLE 3

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loose parental support and eventually student enrollment. If the program fails toimprove student outcomes as specified in the charter, or does not attract enoughstudents, the school board may terminate the charter.

Contract Schools

Under the "contract" option, local school boards are permitted to grant chartersto a range of private groups and individuals, in addition to the teachers andparents at an existing public school. This creates an opportunity for theestablishment of entirely new public schools within the district as well as theconversion of existing public schools. These schools are financed by per pupilpayments from the district and/or state made to the school according toformulae based on the charter school student's share of total school districtexpenditures, adjusted by law or negotiation to account for education, support oradministrative responsibilities the district will continue to bear on behalf ofstudents enrolled at the charter school.

Here, the scope of autonomy granted to charter holders extends beyondcurriculum and instruction to business decisions, such as the right to hire and firestaff, contract for goods and services, and lease or purchase real property.However, the enabling legislation is often written so as to allow a local board todetermine or strongly influence the actual scope of autonomy it will grant in acharter, sometimes subject to a charter applicant's right to appeal a decision todeny a charter to a state education agency. In addition, charter applicants maydetermine that the district is the most efficient provider of such services astransportation and food service, and decide not to pursue an expansion of theirautonomy into those areas or to contract with the district to provide thoseservices. Because the local board is granted substantial discretion in its decisionto grant charters, the nature and extent of alternative schooling in the district willbe largely a matter of board policy. Something like this is approach describesmost charter school legislation.

The precise legal status of charter schools is likely to be uncertain under this typeof statute. For example, the statute may state that teachers remain part of theirdistrict bargaining unit. This implies that the local union negotiator will bargaincharter school labor issues with school district representatives in the broadercontext of labor matters affecting the entire district, a situation that clearly limitscharter school autonomy. In other cases the statute may be silent. Where thelegal status of charter schools is ambiguous, local school boards and union localsare likely to argue that they remain part of the school district. Charter holdersare likely to assert the school's independence, by claiming the status of publicemployer. A resolution may depend on the courts.

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Contract charter schools are accountable for their performance as economicentities as well as for student outcomes. In addition to revoking a charter forfailure of the educational program, the local board may terminate the charter of aschool that fails to maintain financial records consistent with generally acceptedaccounting procedures or that is well along the road to insolvency. Charterholders are accountable to the board to meet the charter's terms, but often havethe right to appeal local board decisions to revoke the charter.

Because they operate on the basis of per pupil payments paid by the state ordistrict to the school, contract charter schools are also highly accountable to themarkpt. Wherp thp super ,zifts-ba=ed rnanagcmcnt -.3chix.,-Is are accouittabie to the

market in the sense that they must attract sufficient students to justify theirprogram in the eyes of the local board and manage staff resources, contractcharter schools will literally go out of business if they cannot generate sufficientrevenues to cover their expenses. This means they must first attract enoughstudents to cover estimated costs, and then manage their financial, human andother resources so as to meet the actual requirements of school operations.

Independent Public Schools

The first two categories of statutes tend to give local school boards primaryjurisdiction over charter schools. Although state education agencies may reverseboard decisions on appeal, only local school boards grant charters and overseecharter implementation under these approaches.

A third category of charter school stands entirely apart from the school district inwhich it is located. The "independent public school" may be authorized by alocal school board in some states, but more likely its charter is granted byagencies operating at the state level, perhaps by the secretary of education as inMassachusetts, a state board for charter schools as in Arizona, a state universityor community college as in Michigan, or by referendum as in New Hampshire.These schools receive something like 100% of the average per student share of thedistrict's educational expenditures for every student enrolled in the school,control all of the functions performed by school districts, are the publicemployers for the purposes of collective bargaining, are treated as if they wereschool districts by other agencies of government, and are distinct legal entities intheir own right.

Like the contract school, the independent public school can be operated by awide variety of private individuals and groups, and controls a broad range ofimportant decisions. These independent public schools are intended to competewith traditional schools managed by the school districts, and this competition is

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intended to pressure the traditional public school system to improve the qualityof its educational services.

Under this approach, charter schools are essentially independent governmentagencies. Here the statutes give charter schools the right to implement theirapproved educational program, control over all economic decisions, and thepowers of a government entity. These schools are accountable to government fortheir educational and economic performance, but also for their adherence tostandards guiding government decision-making processes. Chartering agenciesmay terminate the charters of independent public schools because of a failededucational program or financial insolvency, and also for a failure adhere to statelaws governing student admissions, government procurement or "openmeetings."

The scope of market accountability also expands for independent public schools.Like contract schools, they must offer educational programs attractive to enoughparents to raise revenues sufficient to cover costs, and must manage theirfinancial and other resources wisely, but they are also accountable to the marketfor their behavior as government agencies. Schools that violate the lawsgoverning how public agencies make decisions must bear the costs of defendingthemselves - marginally viable schools could find themselves bankrupted bylawsuits.

Conclusion

Charter schools combine trends in education reform to improve schoolautonomy, increase school accountability to government and the marketplace,and place more of the responsibility for important decisions with thestakeholders at the individual school. State charter school legislation implementsthe basic bargain of autonomy for accountability in a multitude of ways. Thoseinterested in pursuing the concept can look to the statutes for three models:super site-based management, contract schools or independent public schools.The option states choose and the timing of their legislation depends onjudgments as to the mix of autonomy and accountability likely to improvestudent performance.

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3. The Capacities Required of CharterHolders

Whatever the scope of autonomy offered by a state's charter school statute, thelegislation generally requires that those holding charters exercise their autonomyresponsibly and that those seeking charters demonstrate their capacity to do so.To receive a charter: applicants will hal.7e. CCIWirICC &cartel-11LE, agency that

they are capable of operating an autonomous public school. Depending on thedegree of autonomy offered by the statute, applicants may also be required toconvince a chartering agency they have credible educational programs andmeans of assessing student learning, multi-year business plans, and governancestructures. Once they have received their charters, charter holders will berequired to conform with state educational standards and tests, and dependingon the scope of their autonomy, permit audits of their financial records byappropriate state agencies, and comply with various state laws governing theoperation of government agencies.

This section examines the most important aspects of charter school functions:educational programming, business operations, governance, and legalcompliance.8 It discusses the need to consider the people who will control andoperate the school and their capacity to manage the transition from a paperproposal to an operational school.

The Educational Program

Under many statutes, charter schools will be economic entities and governmentinstitutions, but the core purpose of all charter schools is to provide educationalprograms for students in one or more of grades kindergarten through 12. Tooperate a charter school, applicants must be able to conceive and manage aneducational program. They must create a program that is credible to educators,attractive to parents and students, and economically viable. Few applicants arelikely to possess a complete set of the broad array of skills and expertise

8 This section draws upon Marc Dean Millot, What it Takes to Starta PennsylvaniaCharter School: A Guide for Applicants, DRU-1492-IET, RAND Institute on

Education and Training (Santa Monica, CA), September 1996.

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necessary to meet these goals. Most will have to draw upon outside experts forat least some support.

The accountability to the market inherent in charter school funding mechanismsdemands that chartering agencies be assured that the proposed educationalprogram is reasonably likely to attract enough parents and students for theschool to make the school financially viable. The accountability to governmentembedded in charter school statutes requires that chartering agencies satisfythemselves as to the quality of the school's educational offering.

In so far as the educational program is concerned, the nature of the charterapplicant's accountability to the market and government overlap but differ.While parents are certainly concerned about their children's educationalperformance, they may also have other interests that inform their choice ofschools. An extended day may coincide with a parent's work schedule. Anethnic or cultural theme may appeal to a parent's sense of identity. A school'slocation on the way to work or in the neighborhood may influence the choice ofschool, as may the presence of siblings or friends. These elements of theeducational program are certainly relevant to a chartering agencies inquiries intothe attractiveness of the school to parents and hence the financial viability of theschool. But the chartering agencies principal concern should be the efficacy ofthe educational program - its likelihood of improving student achievement. Firstand foremost, chartering agencies have a responsibility to assure the educationalperformance of the schools they charter.

Establishing a new school is a demanding task. As a rule, charter statutes requireapplicants to propose a viable (if not compelling) vision, curriculum, andinstructional approach. They must describe meaningful educational objectives.They must propose means of assessing student and school performance thatconform with state requirements or at least measure progress towards theattainment of the educational program's objectives. Charter applicants mustprovide evidence of their ability to administer a school building - to scheduleclasses, assign students, handle children and parents, set calendars, deal withproblems of student transportation and food service, and the hundreds ofongoing management issues that arise in school. They must demonstrate acapacity to hire and/or develop a staff qualified to deliver the proposededucational program and manage students, staff and parents.

Basic Requirements

Charter school statutes generally require that charter school applications containinformation describing: the student body, including admissions policies and the

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grade or age levels to served by the charter school; the proposed calendar,including the length of the school day and school year; the school's mission andeducation goals, curriculum and assessment methods; and perhaps somethingabout the staff. This information goes to the core of proposed charter school'seducational program. In a proposal of high quality each of these descriptionswill be coherent and consistent with the others. (See Fig. 2.1.)

Fig. 3.1. Important Relationships Among the Educational Program DescriptionsRequired by Charter Statutes

Mission and Goals

A charter school starts with a vision of what it means to be educated; what astudent must know to live and grow in today's society, and to contribute to it;how students learn; the role of a teacher in a public school and of a public schoolin the community; and the values that society should pass on to the nextgeneration through the public school system.

Descriptions of this vision should demonstrate the applicant's understanding ofthe substance of education and the process of creating a school. The substanceconsists of knowledge about state and national standards defining what studentsmust know and the skills they must master to progress through and graduatefrom grades k through 12, the expectations of major employers and the needs ofstudents and parents in the community where the proposed charter school willbe located, and the current state of academic research on learning and teaching.The process centers on skills and techniques to facilitate the development of acommon understanding of the vision within the applicant group. Whenhardships arise, as they surely will, it will be vitally important that all the keymembers of the applicant group, the school's supporters, and the parents of

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children attending the school hold a common view of the school's mission andgoals.

Assuming a credible vision that enjoys real consensus, the extent to which therest of the proposal demonstrates fidelity to the school's mission and goalsshould serve as an important criteria for evaluating the remainder of theeducational program and indeed the rest of the application.

Student Body: Admissions and Marketing

Charter school statutes generally require that applications include a descriptionof proposed admissions policies, procedures and criteria. Most prohibitadmissions criteria based on race, ethnicity, religion, gender, disability,proficiency in English, intellectual or athletic ability, measures of achievement oraptitude, or any other basis that would be illegal if used by a school district.However, some do permit the use of academic ability, and others allow a charterschool to focus on mathematics, science or the arts and establish reasonablecriteria to evaluate prospective students. Many give a preference to siblings ofchildren attending the school. Students attending public or private schoolsconverted to charter status also often receive preferential treatment. In mostcases, where the number of students eligible to attend a charter school exceedsthe capacity of the school, attendance must be determined by lottery.

Charter applications should demonstrate that the applicant has a solid grasp ofthe legal limits of these bases of admission, but chartering agencies need toappreciate that charter school statutes give applicants some opportunity todescribe the kinds of students that they believe will find the school attractive.Indeed, some statutes establish a preference for schools that target disadvantagedstudents. More generally, the charter concept assumes that a wide variety ofspecial educational programs and parental or student choice are good for society,which implies an acceptance of such business concepts as product differentiation,market segmentation, and target markets in the design of an educationalprogram.

Consequently, while charter schools are limited in their capacity to discriminatein their admissions, they are free to develop educational programs tailored toparticular types of students. A charter school probably cannot make gender acondition of admissions, but it can offer an educational program designed tosupport teenage mothers. A charter school cannot discriminate on the basis ofrace, but it can emphasize African-American culture in its educational program.In most cases, admissions must be open, but school designs can be targeted.Chartering agencies must be careful to assure that targeting of the educational

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program to particular categories of students does not become discriminationagainst categories of students who do not fit that profile.

Potential charter school applicants need to demonstrate some knowledge of thegeneral student market and explain how the proposed program matches theneeds of the student body and the parents they hope to serve. The school'smission, its curriculum, the length of its school day and school year, and its staffshould be developed to fit the market. A school aimed at students from aneconomically disadvantaged community of recent immigrants should have astrong capability in bilingual education. A high proportion of its staff, includingthe principal, should be-- able te; cuiranunicate first language. Aprogram aimed at children in families where both parents are employed full-timeshould have an extended school day that coincides with the work day. A schoolthat will attract students with special needs or students just under thethreshold of that classification, should have a staff prepared and certified to teachthose kinds of students. A school aimed at the mainstream student should beable to demonstrate attractive features that will distinguish it from districtschools in the eyes of enough parents to make the school financially viable.Those planning an educational program based on Montessori or Waldorfprinciples, or the Core Knowledge curriculum, should offer the charteringagency evidence of the demand for such a school in the community.

A chartering agency's expectations of the extent and sophistication of this marketresearch should vary with the proposal and local conditions. A proposed schoolfor 600 at-risk teenagers drawn from across a major city may demand moreresearch than one for 25 students. A proposal for a school that must take half of asmaller districts' middle school students to become economically viableshoulders a heavy burden of proof demonstrating sufficient parental interest. Aformal survey may be justified for a school of 1000 students , where the entireeducational program will be contracted out by the board of trustees to a for-profit Education Management Organization, such as the Edison Project or SabisInternational. A community meeting may suffice for an existing public schoolconsidering conversion to charter status. But even where the demand is"obvious" to everyone, the potential charter school applicant should be able todescribe the target market's needs and expectations to demonstrate to thechartering agency that the proposed school is a viable enterprise.

Calendar

The school calendar offers an important opportunity for charter schools todistinguish themselves from other public schools. Charter school operators maybe able to set a longer school day and year than the district's can under

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prevailing union contracts. A longer day and year may be particularly appealingto families with two wage-earning parents who are concerned about leaving theirschool-aged children unsupervised after school lets out for the day andvacations, and who find day care a financial hardship.

A longer day and year can also enhance the efficacy of the proposed educationalprogram. It provides the opportunity for additional instructional hours, whichcan be used for additional time on task in core subjects, to add field trips andother off-campus learning opportunities, to deepen a school's offerings in musicor the arts, or to extend the curriculum into less traditional areas, such ascommunity service. Chartering agencies should expect applicants to explainwith some specificity how the additional hours and days will be used, how theuses relate to the school's mission and goals, and how the additional time inschool will enhance educational performance.

Longer school days and years carry costs that applicants need to address. Morehours in the school building increases the utilities and maintenance expense. Alonger day and year demands more of staff, and may require the school to raisestaff salaries to attract quality teachers, administrators and support personnel. Ifthe school does not increase pay levels, it may be forced to rely on relativelyyoung staff with high enthusiasm but limited experience, or experience high staffturnover. And the funds spent on teachers are funds not spent on somethingelse, such as renovations, equipment and materials. Chartering agencies shouldinquire into applicants financial analysis of their educational program, andexpect applicants to demonstrate that they recognize and have resolved keyeconomic tradeoffs among such matters as the school calendar, salary levels andteacher experience.

Curriculum

The basic service provided by schools is the education of students. Curriculumand the instructional materials and teaching methods that go with it are theprincipal means by which that service is delivered. Charter applicants maydevelop their own curriculum from scratch, they may purchase materials andtraining for all or some of it from for-profit and non-profit developers, or theymay contract with a profit or nonprofit firm to provide all or part of the basiceducational service directly to students.

The choice among these options depends on the capabilities and objectives of thepotential charter holder. The school of education at a college or university maysee the charter school as an opportunity to create a "laboratory school" -

developing curriculum, materials and instructional strategies is well within itscapacity. A social service organization with a history of community service

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related to education, including perhaps worker training or pre-natal education,may be able to contract with a design-based assistance organization (such as oneof the design teams funded by the New American Schools Development

Corporation) to train its staff to implement a particular curriculum. A school thatfinds itself with many students below their grade level in reading or math mayhire a firm like Sylvan Learning to take on that specific part of the curriculumaimed at improving math or reading skills. A charter school started byparentsprobably will need to delegate the responsibility for curriculum development tothe teaching staff it hires to operate the school, or to firms like Sabis, Edison,Alternative Public Schools, or Advantage Schools, contracted to operate theschool's educational program.

From the chartering agency's perspective, the key issue is whether the proposedcurriculum is reasonably likely to yield satisfactory levels of educationalperformance. Whatever approach is taken, applicants should provide evidencethat the school's curriculum supports its mission, meets the needs of the studentbody the school hopes to serve, fits the capabilities and training of the teachershired to use it, coincides with the school's calendar, and is in harmony with thekinds of student assessments the school will use to demonstrate educationalperformance.

Developing a curriculum that is consistent across these dimensions requiresprofessional expertise in the design, development, and use of educationalprograms. Just as a chartering agency could reasonably expect that the charterholder will retain an attorney to review proposed and actual school operationsfor compliance with the law, and a financial expert to help develop the businessplan and monitor the budget, it should expect that an educator will be involvedin developing the curriculum and reviewing its execution. Applicants shoulddemonstrate an intention to retain access to this expertise after charter approval,and particularly during early implementation of the proposed educationalprogram.

Assessment

Charter school statutes typically require that students in charter schools meet thesame testing and academic performance standards that apply to other publicschool students. This establishes a baseline against which a proposededucational program will be judged. In addition, charter school applicantsarepermitted and sometimes required to describe the desired outcomes of theirproposed educational programs and to explain how those outcomes will bemeasured.

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Chartering agencies should expect applicants to explain how the proposedcurriculum relates to required state tests and standards, and point out if, howand where it may have been adjusted to meet state requirements. Agencies arewell within their rights to reject a proposal containing a curriculum totally atodds with state standards, but should be careful not to reject unorthodoxcurriculum proposals merely because they are not wholly consistent with thosestandards. Applicants should be given an opportunity to explain how they planto bridge the gap.

Attention should be given to the value of an applicant's alternative assessments,particularly where state-wide standards and assessments have not been defined.Applicants should be able to explain the objectives of their educational program,relate those objectives to standards of performance, and demonstrate how theirassessment techniques will measure student achievement against thosestandards.

The consistency of curriculum and standards goes to chartering agencies'determinations of a proposed school's financial stability as well the efficacy of itseducational program. Should a charter school's students fail to meet stateacademic requirements because the educational program does not address thoserequirements, it is likely to lose the students it has, fail to attract new students,and become insolvent.

Assuring that the proposed curriculum is aligned with state standards andassessments will require the expertise of a professional educator with relevantexperience. Chartering agencies should seek assurances that applicants willretain the services of educators skilled in assessment after charter approval.

Staff

Charter school statutes may require some, all or none of the staff to hold validteaching certificates issued by the state. In addition, the statutes sometimesrequire the charter applicant to describe the proposed faculty. This may meanthat the applicant will be expected to name specific individuals and provide theirresumes. More likely the application must contain job descriptions andqualifications for faculty positions. In any case, even where there is no explicitrequirement that the applicant provide such information or hire certifiedteachers, chartering agencies have a right to expect applicants to provide acredible explanation of how the staff will be organized and the skills andexperience required of each staff member to implement the proposed educationalprogram.

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Applicants should be able to demonstrate that the administrators and supportstaff, as well as the teachers, hired to run the proposed charter school will bequalified to fulfill its mission, teach its curriculum, and meet the demands of its

calendar. Moreover, because the charter school will be a new venture with all thechaos and uncertainty that status implies, chartering agencies should assurethemselves that the staff is likely to be enthusiastic, resourceful and flexible.Where the applicant plans to contract out the entire educational program, itshould be able to point to contractual assurances that the staff will be competentin all these respects, and retain some right to determine competence.

Special Education

Charter schools are not generally permitted to discriminate against students withspecial needs and must comply with state regulations concerning specialeducation. Assuring compliance requires several distinct areas of specializedexpertise, including special education administration, diagnostics, pedagogy andlaw. Chartering agencies should expect applicants to describe how they willsecure access to people qualified to identify potential special needs students,administer appropriate assessments, diagnose individual student's special needs,develop an individual education program to meet those needs, and how theywill deliver the programs developed for special needs students.

The administration of special education can be expensive and charter applicantsshould demonstrate that they understand its complexity and potential cost. Theyshould provide evidence that they are aware of special education law and havetaken actions designed to improve their school's capacity to accommodate specialneeds students effectively and efficiently. Staff planning should call for at leastsome teachers and administrators to have special education certification.Curriculum should be examined for its potential application to students with

special needs. Admissions procedures should support the early identification ofstudents with special needs. Efforts should be made to estimate the likely sizeand nature of the special needs component of the student body, developcontingency plans for serving those students, and assess the impact of specialneeds populations on school finances.

While it is likely that the parents of children with acute physical or cognitive

disabilities will avoid the charter school when they realize that the support theirchild needs can only be met with resources available to the school district, thestories of charter school operators across the country suggests that charterschools may be attractive to parents with children whose needs are lessdemanding or who fall immediately below the state's threshold for special needs

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designation. Charter schools often adopt concepts and terminology developedby the special education community - the idea of an individualized educationprogram, for example. They also often consciously project the image of a loving,caring, sympathetic, non-bureaucratic institution. Parents with children whomeet or barely miss the special needs criteria seem to find these schools

appealing. Charter applicants should demonstrate an awareness of this tendencyand explain their plans for dealing with it.

Because of the social stigma attached to disabilities and the arcane nature ofmodern special education law and practice, it tends to be a neglected area ofcharter school planning. Chartering agencies should seek assurance that theexperts in special education had a hand in development of the application, andthat the applicant will retain the services of such experts once the school is inoperation.

Waivers from State Regulations

Many charter school statutes provide a blanket waiver from all, most or some ofthe state education code, except for those provisions concerning assessment,testing, civil rights and student health and safety. But other charter legislationrequires applicants to identify those portions of the education code that shouldbe waived in order to operate the proposed school (again except for provisionsconcerning assessment, testing, civil rights and student health and safety) andparticularly to implement the proposed educational program, and to justify thoserequests. The waivers granted often become part of the school's charter.

In many cases individual waivers will have to granted by an agency other thanthe one granting the charter. Chartering agencies must decide if they willconsider applications before such waivers have been obtained, granting charterscontingent on the waivers, or if they will consider applications only after theagencies granting waivers have rendered there decisions.

Whether or not they have the authority to grant waivers, chartering agenciesneed to pay careful attention to an applicant's waiver requests. Waivers notgranted because they were refused - or because the applicant failed to ask forthem - may have a minor effect or may make it impossible to implement theproposed program. Because waivers become part of the charter and the chartercan be difficult to amend, both the applicant and the chartering agency mustunderstand these effects before the charter takes effect. Chartering agenciesshould expect applicants to have a solid grasp of the proposed educationalprogram, state regulations, and the effect of regulations on the applicant's ability

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to implement the program and fulfill the school's mission. Applicants shouldknow whether they need a waiver to carry out every element of their proposal.

Gaining an understanding of the relationships between the regulations and theeducational program is an iterative and multi-disciplinary process. Lawyers andeducators will need to work together very closely. Applicants shoulddemonstrate that they have conducted such a review, but chartering agenciesshould be prepared to work with the applicant to assure that the proposal andwaivers match before granting a charter.

School Administration

A public school is more than an educational program, it is a peculiaradministrative problem. Assuming a charter is granted, the applicant will haveto manage the full range of activities related to schools - including schedulingclasses, assigning teachers and students, handling disciplinary matters, makingdecisions about children and parents, dealing with problems of studenttransportation and food service, and the hundreds of other issues unique toschools. Chartering agencies should expect that applicants will know how theypropose to administer the school .

Someone - a "lead teacher", "headmaster," "rector", "chief education officer", or"principal"- will have to run the school building. Choosing that person will bethe applicant's most important personnel decision, and perhaps the decisionmost important to the ultimate success of the charter school. The school'sprincipal will be the vital link between the charter school and the rest of thepublic school system, the school's board and staff, the teachers and the parents,and the school and the community at large. Chartering agencies should expectapplicants to identify a specific person who they propose to administer theschool .

Applicants should be able to demonstrate that their proposed principal is capableof leading the new school. Because the business of schools is education, it isreasonable to expect that the principal will be an educator. Because the charterschool is real operation rather than an academic study, it is reasonable to expectthat the principal will have experience administering a school. To the extent thata charter school is legally, financially, and administratively independent of theschool district in which it is located, it may be reasonable to expect that the

principal will have experience managing a public school district or a privateschool. Where applicants cannot demonstrate that the proposed principal has allthis expertise and capacity - and few will - they should be able to point to other

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people who do, and explain how they will combine to form an effectivemanagement team.

Business Operations

Most statutes provide charter school operators with a broad set of powersnecessary to control their fate as financial entities. Generally, when autonomyextends to the economic arena, charter schools may receive and disburse funds;solicit and accept gifts and grants; and receive, hold, manage and use trusts andother bequests for school purposes. They may make contracts and leases for theprocurement of real property, services, equipment and supplies. They may bepermitted to incur temporary debt in anticipation of the receipt of funds or evenlong term debt. Beyond these specific powers, many statues include provisionsgranting general powers "necessary or desirable" for carrying out the schoolsprograms and other powers necessary to fulfill the charter which are "notinconsistent" with the statute itself.

The responsible exercise of this economic autonomy requires substantial business

expertise. Potential charter school operators are required to demonstrate theirbusiness capacity by describing the financial or business plan for the charterschool in their application. After the charter is granted, the applicant mustexecute that plan, start up the school, and manage an ongoing businessoperation.

Financial Planning

Applicants should provide substantial evidence to chartering agencies that theyhave not approached development of the financial plan with a "compliancementality," i.e., that it is something that was completed primarily because thelaw requires it be included in the application. Applicants should demonstratethat, after their vision of mission and goals, they consider the financial plan to betheir most important conceptual tool. They should describe the plan in such away as to convey an appreciation of its role as the monetary expression of theirvision of the charter school and a reflection of their real priorities. They shouldbe able to provide concrete example of how they have used the plan and theplanning process to identify critical policy issues, reconcile conflicting priorities,and integrate the various components of their application. They should be ableto explain how their use of financial resources will achieve their vision.

Financial planning is complex and iterative. The most important relationshipsare among the charter school's educational program, student enrollment,

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revenues, building, special education needs, and staff. (See Fig. 3.2.) Charteragencies' expectations of applicants' descriptions of educational programs,student enrollment, special education needs, and staff were discussed above.Expectations of applicants' descriptions of the charter school's building andrevenues are covered here, followed by a brief review of expectations ofapplicants' descriptions of how all these factors interrelate.

Fig. 3.2. Important Financial Relationships of a Charter School

The School Building

Many charter statutes permit the schools to be located in any "suitable location."Some exempt charter schools from public school facility regulations, except thosepertaining to the health and safety of pupils. Most require applicants to providethe address and description of the proposed school.

Chartering agencies should expect applicants to identify facilities suitable forstudents and the proposed educational program, or which can be made suitable.Applicants should provide the cost of leasing or acquiring the space and copiesof the relevant contracts and architectural plans; estimates of the costs ofrenovations and repairs prepared by qualified contractors; and any loandocuments related to the real estate. Ultimately the agency must be satisfied thatthe facility is safe for students and suitable for the proposed educationalprogram, that the cost of occupying the space will not jeopardize the financialstability of the school, that the repairs and renovations will be obtained at a fairprice, and that there is no undue enrichment of people associated with thecharter application.

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Finding an appropriate facility will be one of the most difficult tasks faced byapplicants starting a new school. School facilities will have to conform to zoningrequirements, general and school building codes, and provide access tohandicapped persons. The cost of required renovations can be substantial.Chartering agencies should expect applicants to have problems closing deals onappropriate locations for their schools.

In any given jurisdiction, there will be a limited number of potentially suitablesites. On the whole, school districts have not proved ready and willing to makebuildings available, especially where the charter application has been made toanother agency. (Some statutes now require school districts to give charterschools first priority in the use of surplus district properties.) Nonprofitcommunity institutions, such as the YMCA /YWCA or Boys/Girls Club oftenhave suitable facilities, but may not have sufficient space. Vacant parochialschools may not be located where the applicant hopes to open a school, and arelikely to require renovation. Commercial buildings will almost certainly have tobe renovated to create classrooms and other school facilities.

Chartering agencies should not give final approval to a charter until an applicantproduces contracts demonstrating that suitable property has been secured andnecessary repairs or modifications to the facility will be made. However, wherean application would be approved "but for" a suitable facility, charteringagencies should consider granting a charter conditioned on the applicant'ssecuring of a suitable facility. Such a document will prove reassuring to thefinancial community when the charter applicant applies for a loan to renovate orrepair the facility in question. The conditional charter shows potential lendersthat the proposed school has the support of educational authorities, improvingthe chances that a school eligible to receive public funding will open, and thatrevenues will be generated to repay the loan.

Locating suitable space, considering the need for and cost of renovations,determining the applicability of zoning and building codes, finding aconstruction loan, and negotiating the lease or and purchase of real estate,requires professional assistance. Charter school applicants should demonstratethat they have made use of commercial real estate agents, building inspectors,general contractors, real estate financiers, and attorneys with a practice in realproperty, and will continue to do so as the school building becomes ready foroccupancy.

Revenues

Charter school statutes generally prohibit charter holders from charging tuition.Charter schools may receive and use grants, gifts, and other bequests of money,

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but their principal source of revenue is likely to be payments made by the schooldistricts or the state treasury based on enrollment. These payments are describedin a formula contained in the charter school statute based on something like theaverage share of the education budget (not including capital, mostly building,costs) in the school district where the charter school student resides, or theaverage share of the state payment to the district, attributed to each studentenrolled in the charter school. Many statutes also provide charter schools with aproportionate share of payments made by the state and/or federal governmentto the district for particular categories of students (e.g., economicallydisadvantaged or special needs) or particular programs.

Applicants must demonstrate that they are likely to attract the number ofstudents necessary to raise the revenues required to cover the costs of theirprogram. They should also demonstrate an understanding of how changes in thesize of the student body would affect revenues and cause adjustments to theexpenditures side of the budget. An applicant's capacity to carry out the keyelements of the proposed program should not be affected by revenue shortfallscaused by normal changes in the size of the student body. Nor should importantaspects of the program be dependent on grants. Indeed, chartering agenciesshould be wary of educational programs that cannot be implemented withoutadditional funds. Even where grants have been secured to sustain a programelement for several years, the chartering agency must consider what will happenwhen the grant runs out and how effective the proposed school would bewithout that program. Chartering agencies should feel assured that the charterschool will not be tempted to pressure parents to make "donations," becauserevenue shortfalls jeopardize the schools ability to carry out the program.

Charter school statues may or may not establish a payment schedule for thecharter school. In any case, the proposed financial plan should containassumptions about the timing of payments that conform with applicable laws orregulations. Where the chartering agencies also disburse funds to the charterschools, they may have discretion in decisions about the timing and size ofpayments. In these cases, the agency should expect applicants to proposepayment schedules that allow the revenues received by the school to matchactual enrollment by the end of the school year, meet the school's cash needs forregular expenses throughout the calendar year, maintain reasonable reserves,and perhaps provide some opportunity for the school to earn interest income.

The Integrated Plan

The educational program, the core of charter school operations, should bedesigned with a potential student market in mind, including a particular kind of

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student and a particular number of students. The program and the kind andnumber of students will generate requirements for particular materials andteachers, and possibly particular kinds of space.

Student enrollment will determine the revenues generated by the school. Thoserevenues must be sufficient to pay for the building space chosen as the school'slocation (including any renovations that may be needed to make the spacesuitable for use as a school, as well required furniture and equipment), and topay the staff required to carry out the chosen educational program and operatethe charter school. The building should be located somewhere safe andconvenient to attract the required enrollment and desired staff.

The building, the staff, and the educational program will also have toaccommodate students with special education needs. Some - but by no means all- of the additional costs of these students will be offset by revenues received forthese students, so the school's general revenues must be sufficient toaccommodate special education. The proposed budget must assure that thefinancial aspects of each of these factors add up to an economically viable charterschool.

Starting and Managing the New Business Operation

When reviewing the business side of a charter application, chartering agenciesshould pay attention to how the applicant proposes to implement the financialplan if the charter is granted. Particularly where the applicant is starting anentirely new school, the chartering agency should expect large expenditures wellbefore the first day of classes. Leases for school facilities and perhaps equipment(e.g., copy and fax machines, computers, telephone systems) must be negotiatedand signed. Contracts may be let to install fixtures, paint classrooms andhallways, purchase books and classroom materials, and to provide foraccounting, meal and payroll services. A principal, business manager, and otherstaff must be hired.

Because the schedule of payments to charter schools will be dictated by localcircumstances and start-up expenses are bound to be quite substantial, themaintenance of tight financial controls will be essential to the school's initialeconomic viability. Chartering agencies should expect applicants to explainthese control systems in some detail. Some one or some group, perhaps a chieffinancial officer, business manager, or the finance committee of the charterschool's board of trustees, should control major expenditures directly so that theschool stays within the proposed start up budget.

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Applicants should also define the end of the start-up phase, after which financialmanagement can be delegated to the school's administrators. But even in thiscase, applicants should describe financial controls. There should be some limit onthe amount of money a principal can commit without the approval of someonedirectly responsible for finances. The authority to write, sign and record checksshould be divided among several people. The school will require up to datebookkeeping services and access to an accountant. The board shouldperiodically review the budget, and provision should be made for outsidereviews or audits of the books by certified public accountants and charteringagency personnel.

Where the annual payment to a charter school is $5000 per student, a charterschool of 200 students is a million dollar enterprise. The design andimplementation of sound financial management procedures requires access toprofessionals with business management expertise. Chartering agencies shouldbe assured that those managing the finances of such a school will haveentrepreneurial experience in a business venture of comparable scope or be invery close contact with persons of such experience who take an active role in theschool's financial management processes.

Governance

Most statutes make charter schools autonomous from government at least to theextent that they have the right to carry out the educational program contained intheir approved charter. In many cases charter school autonomy also extends tobusiness decisions, such as the right to hire and fire the personnel employed bythe school, to employ the financial resources available to the school, and to enterinto contracts for real property, goods and services for school purposes. Thescope of autonomy also often extends to decision making. For example, statutesallow charter schools to design and implement their admissions process.

But the decision making autonomy of charter holders also is often constrained bystatute. Charter statutes often require applicants to demonstrate how they willbe accountable to parents, the public, chartering agencies and the state. In somecases applicants have some opportunity to define these relationships in theapplication. In others, the nature of charter school governance is defined bystatute. Under some laws teachers must make up a majority of the school'sboard of trustees. Under others decision making procedures must be consistentwith state law for nonprofit corporations. To manage a charter school, applicantsmust be able to demonstrate both an understanding of what may well be acomplex governance structure and the capacity to operate within that structure.

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Self-Governance

The precise legal character of charter schools varies by state. They may benonprofit corporations, governed as if they were nonprofit corporations,cooperatives, municipal bodies, the bundle of rights and obligations contained intheir charter or in the charter law, or their legal status may not be clear.Whatever their status, charter schools are usually governed by a board of trusteesvested with the authority to decide matters within the scope of autonomygranted to charter schools by the statute under the terms of the charter.Applicants are generally required to describe a governance structure for theproposed school, including a description and method for the appointment orelection of members of the board of trustees. They are also often required todescribe and implement strategies for meaningful parent and communityinvolvement. In many cases charter schools are subject to state open meetings,freedom of information, and government procurement laws.

The Board of Trustees

Charter statutes generally give applicants substantial flexibility in the make up ofthe board of trustees, although statutes may require teachers to make up amajority or prohibit local school board members from serving. Similarly,applicants generally are allowed to decide whether the board of trustees willreserve certain powers to itself or delegate them to an executive committee orsome other charter school official, whether decisions on certain issues willrequire a super-majority vote, and the frequency of required board meetings. Insome cases applicants may choose to formally organize the school as a nonprofitcorporation under state law - in which case the structure of self-governance willbe contained in legally binding articles of incorporation and by-laws andincorporated into the charter by reference in the charter application, or to treatthe charter as the document that gives the school its nonprofit status - in whichcase the details of the proposed governance structure contained in theapplication will serve the same purpose as articles of incorporation and by-laws.

Applicants are also generally given substantial leeway in determining how theymeet, design and implement any statutory requirement for parent and/orcommunity involvement. The obligation might be satisfied by reserving seats onthe board for parents and community members. It might be satisfied by devisinga formal process for gathering data about parent and community needs andinterests, and considering that data at board meetings. It might be met bydesignating the principal or a board member as the school official responsible forassuring parent and community access.

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Whatever system of internal governance is devised, it will become part of thecharter, and thus legally binding on the operational charter school - and could bedifficult to change. Like the waivers from the state education codenecessary toimplement a proposed educational program, internal governance is somethingan applicant group should consider seriously before submitting an application.

Chartering agencies should expect applicants to understand the basic features ofcharter law relating to the form of self-governance and propose systems thatconform with statutory requirements. Beyond this, applicants should berequired to demonstrate how their proposed governance scheme balancesmostcharter statutes' goal of outrParh. incluLion against uic need fur effectivecontrol of the school, sound financial management and accountability fordecisions. Applicants should be able to explain how the proposed structuresupports the vision of the school and helps assure its financial stability.

Lawyers are essential to the deliberative process leading to the development ofthis system - they can supply important language and concepts, draw on aconsiderable body of practical knowledge about the governance of boards andcorporations, and provide models. Chartering agencies should expect evidencethat experienced lawyers have reviewed the proposed system and assurancesthat counsel will be retained to assure compliance with relevant law. But, theschool's stakeholders will have to live with the system approved in the charterand must play important roles in the development process. Governance is tooimportant to leave to the lawyers, and chartering agencies should be satisfiedthat important stakeholders understand and agree with proposed decisionprocesses.

Open Meetings and Other Laws to Make Government Accessible

Applicants often have no choice of the rules governing the board of trustees'deliberative processes. Many, if not most charter statutes make the board oftrustees subject to the state open meetings, government procurement and

freedom of information requirements. The details of these statutes are beyondthe scope of this guidebook, but all seek to make government decision makingmore accessible to the governed. A brief overview of open meeting lawillustrates this point.

Open meetings legislation covers "official actions" discussed or taken by aquorum of the charter school's board of trustees. Closed meetings may be heldfor a limited number of reasons, including: employment issues, unless theemployee in question demands an open meeting; collective bargaining strategy;discussions concerning the lease or purchase of real property; consultations withattorneys or advisors on litigation; and to maintain a confidence or privilege

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protected by law. All other actions must be taken at a meeting open to thepublic. The public must be given at least 24 hours notice of the meeting in anewspaper of general circulation in the jurisdiction where the school is located,and a reasonable opportunity to participate. Written minutes of the meetingsmust be kept and made available to the public, and members of the public mayrecord the meeting with audio or videotape. Decisions are to be made in publicmeetings following public discussion, and not in the course of an informalgathering of a majority of the board attending a social occasions, and certainlynot in secret at a board member's home. Decisions taken at an unauthorizedmeeting are null, and individuals with an interest in the school may bring suit instate courts to have such decisions declared void.

After a charter is approved it may be difficult to police charter holders'compliance with the open meetings and similar requirements designed to assureopen decision processes. No doubt, the board will need legal guidance tounderstand these rules and the constraints they place on board members, andapplicants should identify counsel who will serve this function. But it is evenmore important that individual trustees incorporate the spirit of the openmeetings law into their personal system of ethics. Chartering agencies shouldexpect those members of an applicant group in leadership positions or likely tobe members of the board of trustees to demonstrate a rudimentaryunderstanding of these laws and an appreciation of their importance.

Management of School Operations

Charter statutes do not generally require applicants to provide detaileddescriptions of how day to day operations will be managed. However,particularly where autonomy extends beyond the right to implement anapproved educational program, self-governance includes description of staffresponsibilities, personnel policies, financial management procedures and thelike. In some of these areas, such as student discipline and the means ofaccommodating persons with disabilities, applicants are likely to constrained bystate and federal law. In other areas, policies may be defined in the charterstatute.

In most instances, such as general personnel policies or whether the school willseparate traditional school administration functions from those related tofinancial management, descriptions are largely up to the applicant. Applicantsneed to remember that they will be bound by their policies and should considerthe content and implications of the words they choose with some care. In somecases specialized expertise will be required to draw up these policies, butsoftware packages with model policies, forms, and manuals are readily available.

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Applicants will need to research the list of areas that will require policies anddocumentation, acquire models, and consult experts. Chartering agencies shouldexpect the applicant to produce such policies, outlines of such policies, or at leastan integrated plan listing the required policies, the person responsible fordeveloping such policies, and a timetable for their completion.

Accountability to the Chartering Agency

Charter holders are accountable to the chartering agency for adherence to theterms of their charter and the requirements of their state's charter statute.

Charter holders are typically required to provide an annual report to charteringagency, other state agencies, parents of children attending the school, and thepublic, in a form prescribed by the chartering agency or the charter statute. Thechartering agency generally enjoys a right of ongoing access to the records andfacilities of the charter school to ensure that the charter school is in compliancewith its charter and applicable law. Based on information obtained by this

means, the chartering agency is usually responsible for assuring that the school ismeeting the terms of its charter. A detailed review may be required when thecharter holder seeks renewal of the charter.

Chartering agencies often are given the power to revoke or decide not renewcharters for material violations of the charter; a failure to meet the charter'sstudent performance requirements or generally accepted standards of fiscalmanagement; a violation of the charter statute or of laws the charter school hasnot been not specifically exempted from; and acts of fraud by the school or itsboard of trustees against the chartering agency. Where health or safety of aschool's pupils or staff is at serious risk, the chartering agency often may takeimmediate action to revoke a charter.

Charter applicants generally are not required to address accountability to theirchartering agency in their applications, but chartering agencies should questionapplicants about how they plan to meet the statutory requirements. Agenciesshould expect applicants to develop procedures that ensure timely and accurateannual reports, well-organized records, and the reasonable ongoing access ofschool board representatives.

Legal Compliance

Charter schools are typically characterized by advocates and the media asinstitutions that operate "free" from government regulation. The

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characterization is highly misleading. Charter schools are often given waiversfrom many rules governing public schools, but their autonomy is moreaccurately described as the freedom to determine how to comply with a widevariety of state and federal laws. Statutes generally contain a provision requiringcharter holders to comply with all Federal and state laws, rules and regulationspertaining to public schools, except where the charter school has receivedwaivers under the charter act. The statutes move decision making authority fromschool districts to individual public schools, but individual charter holdersremain accountable to chartering agencies for compliance with many if not mostof the laws governing public education.

Either by explicit reference or the lack of an explicit waiver in the statute,

substantial portions of the state education code and other state law apply tocharter schools. Many of these laws have already been discussed in this section,including teacher certification, special education, the rules governing theapplications process, admissions, facilities, and charter school governance.Additional rules and regulations are contained in many charter statutes andinclude: prohibitions on sectarian operations, and laws governing charter schoolliability and immunity, student transportation, audits, civil rights, and schoolemployees. Chartering agencies should expect applicants to demonstrate arecognition of the need to comply with these laws, explain basic procedures fordoing so, and voice an intent to secure continuing access to relevant legalexpertise.

Religious Affiliation

Charter schools may or may not be explicitly prohibited from affiliation withreligious institutions, but their relationships are highly constrained. Consistentwith constitutional law to date, most statutes explicitly prohibit charter schoolsfrom providing any religious instruction. Some require that charter schools mustbe nonsectarian "in all operations." Many also prohibit the display of religiousobjects and symbols on the premises of the charter school, a rule that may makesurplus parochial school buildings less attractive potential charter school sites.

These restrictions may not prohibit a sectarian school from converting to charterstatus, but they plainly alter its religious flavor. For a sectarian conversion,school operations would have to come under the full control of a nonsectarianboard of trustees; religion classes would be removed from the curriculum (andperhaps even from after-school activities); admissions and employment could notbe based on religious affiliation; and religious symbols would have to removedfrom the building, including those built into the fabric of the school structure.

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The extent to which a nonsectarian charter school is permitted to draw on theresources of a religious institution is not entirely clear. The religious institutioncould provide a school building; clergy could teach non-religious subjects; andcourses on philosophy, morals or culture might include a discussion of theaffiliated religious institution's faith. Whether the school could make use of acafeteria in the basement of the church across the street, how many members ofthe clergy could be part of the teaching staff, whether clergy could serve asprincipal or on the board of trustees, and how much of the morals course couldbe taken up by the faith of the affiliated religious institution is unclear.

Chartering agencies that do not completely rule out parc.--d-dal conversionsor charter school affiliations with religious institutions should proceed with care.Of course applicants must demonstrate consistency with the charter statute'sprovisions, but the chartering agency probably also will have to make judgmentsabout what is permissible under the Constitution and expect their decision to betested in the courts. Before they proceed to such judgments, charter agenciesmust convince themselves that the applicant does not intend to create a religiousschool with public money. The more pervasive the connection between thecharter school and the religious institution the harder it will be to satisfy thisrequirement.

Liability and Immunity

Some statutes treat charter schools as government agencies, with the same degreeof sovereign immunity. In these cases, charter schools often may sue and besued, but only to the same extent as other government entities. Charterapplicants should demonstrate an understanding of the extent to which theschool and its employees may be held financially responsible for injuriessustained by students, employees and guests under state law. In particular, theyshould be able to explain the extent to which the school's educational programand school management procedures risk liability; and the risk managementstrategies they have adopted, including the purchase of insurance. Applicantsshould be able to assure chartering agencies that their liability and riskmanagement assessments are based on a coordinated discussion among theeducators designing the school's curriculum and extra-curricular activities,school administrators, the school's lawyers, and the school's insurance broker.

Student Transportation

Student transportation is often a problem for charter schools. Their studentbodies are drawn from across and even beyond the school district in which they

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are located, their school days and school years are often longer than the rest ofthe district's schools, and their educational programs may involve substantialoff-campus activities. Many statutes require school districts to providetransportation to the charter school "on the same terms and conditions" as tostudents attending schools in the district. In other cases, the applicants maychoose to receive the a payment equal to each student share of the district'stransportation budget. In either case, applicants are often required to describetheir transportation policies.

Applicants should demonstrate an understanding of provisions in the charterstatute covering transportation. They should describe a policy that conformswith the charter statute, other laws governing student transportation, and isconsistent local concerns regarding student safety. Where appropriate applicantsshould identify proposed transportation contractors and submit the contractors'proposals, and describe the influence of its proposed transportation policy ontheir schools' liability and insurance.

Audits

Many statutes require charter schools to comply the provisions of state law foraudits of public school operations. Applicant should demonstrate anunderstanding of these requirements, explain the process they will employ togenerate financial reports in forms that satisfy state requirements. Wherenecessary in the design and implementation of such procedures, applicantsshould demonstrate their access to specialized expertise in governmentaccounting.

Desegregation

Charter statutes and the courts may prohibit chartering agencies from grantingcharters when the proposed school would place a district in noncompliance witha desegregation order. Charter applicants should demonstrate an understandingof local desegregation orders and consent decrees operating in the district wherethe proposed charter school will be located and perhaps in other districts fromwhich the applicant plans to draw any significant number of students. Wheredesegregation is an issue, chartering agencies must be assured that neither theintent of the applicant nor the likely effect of granting the proposed charter is toevade the law. Applicants should be able to demonstrate that they drew onrelevant legal advice to help fashion an application that would not place thedistrict in noncompliance.

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Student Discipline

Charter statutes may require that applications contain a description of theproposed school's policies for suspension and expulsion. The U.S. Constitutionguarantees that students enrolled in a public school cannot be deprived of theirright to a place in that school without due process of law. Applicants shoulddemonstrate an understanding of student rights, describe policies that protectthose rights, and assure chartering agencies they will carry out such policies.

Employees

Depending on the statute, charter school employees may or may not be publicemployees. If they are not public employees, the applicant will be bound by stateand federal law governing private employment relationships and shoulddemonstrate an understanding of that law or point to the services of a competentlabor attorney.

Where charter school employees are public employees, that status confers specialrights on staff and creates special obligations for management. The law of publicemployees is well beyond the scope of this report, but may apply to charterschools in the several ways. Charter school employees may enjoy immunityfrom tort liability. They may be elibible for or enrolled in the state retirementand health benefits systems.

Charter school staff may be subject to special requirements that apply to publicemployees. Employees in direct contact with students may be required to submita report concerning criminal history records information or clearance statementsregarding child abuse. Charter applications may be required to contain thesereports.

Perhaps most important, charter school employees may be permitted to organizeunder the state's public sector labor relations act. Depending on the charterstatute, their bargaining unit may or may not be independent of any otherbargaining unit, including one representing similar employees of the schooldistrict. Depending on the statute, either the charter school's board of trustees orthe local school district will become the public employer required to negotiatewages, hours and working in good faith as defined by the state's public sectorlabor law.

Charter applicants should demonstrate an understanding of the applicableprivate or public sector labor laws, describe policies and procedures that conformwith the requirements of those laws, and identify legal counsel for such matters.

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People

To develop a charter proposal and obtain a charter, applicants require a "coreteam" of experienced generalists to define the vision of the proposed school'seducational mission and integrate its educational program, business plan andgovernance structure into a coherent charter application.9 For the "contract" or"independent" charter schools described in Section 2, the ideal group consists ofat least one person with a sense of the vision, an educator, an entrepreneur, anattorney, an individual with experience writing proposals, a facilitator to managethe complex and multi-disciplinary process of developing an application, andsomeone with experience in local political campaigns. In the case of the "supersite-based management" variety of charter schools, group needs will focus onskills in educational programming and school administration. In all cases,members of the group should have experience with "new starts," sufficientknowledge of their field both to "know what they don't know" and to "knowwho to ask," the ability to work well in groups, self-discipline, and a boundlessoptimism.

Chartering agencies also should understand that the skills required of theapplicant group will change during the process of starting a charter school. Theyneed to assure themselves that applicants will be able to make a relativelysmooth transition through the several phases of charter school start-up - from thehard to define time when the school is someone's hope to the point at whichknowledgeable educators and businessmen would agree it is a going concern.

The first phase is one of "team building." The potential applicant must find theright people for the core team; persuade them to participate; and "network" toidentify potential sources of political, monetary, and technical support. The coreteam and its key supporters must build a shared vision of the school's mission,including who it will serve, how it will approach learning and teaching, and theprocess of self-governance. Where applicants interact with chartering agencies asthey explore the charter concept, agency personnel will have an opportunity tojudge the capacity of leaders to attract and motivate members of the largerapplicant team. However, this phase should have passed by the time anapplication has been presented for review and approval. The success of theteam-building phase will be reflected in the diversity of team members' skills

9 See Marc Dean Minot and Robin J. Lake, So You Want to Start a Charter School?,UW/RAND Program on Reinventing Public Education, University ofWashington (Seattle), October 1996.

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and expertise and in the moral and financial support of local community andbusiness groups.

The second phase involves planning and writing the charter application. It isduring this phase that the school's management structure will begin to take form.Leaders of the applicant team must manage an organizational structuredependent on consensus to accomplish its goals, yet they must propose a newmanagement structure based on legal responsibility and some degree of rolespecialization that will assure the smooth operation of a real school. They mustunderstand how to build individual commitment to the school and learn how toaccept aitd use outside help. At the same time they must keep to deadlines,incorporate good management practices into the school's design, and makeeffective use of specialized expertise. This phase should also have passed by thetime the application is submitted for consideration. Nevertheless, charteringagencies will probably have several opportunities to judge applicants'organizational capacity: including their ability to meet deadlines, the extent towhich members of the applicant team voice a consistent vision of their school'smission, and the ability of the chartering agency to obtain timely and meaningfulresponses to questions and requests for additional information.

The third phase involves politics and public relations. Applicants must take theproposed school to the chartering agency, the media, and the public. They mustbe prepared to negotiate with government agencies and deal with politicalopposition. They will need to deal with the press and the local politicalestablishment. The applicant group will need a spokesperson and a way todevelop common positions on controversial matters, and the group's memberswill need to exercise discipline in making their own remarks. The applicationmay go to a referendum, requiring the applicant to organize to "get out the vote.This phase coincides with the submission of a charter application, and charteringagencies will quickly learn whether the applicant is politically sophisticated,naive or ham-handed.

The fourth phase is one of management. After the charter is approved but beforethe school is viable, resources must be employed with great prudence. Whereautonomy extends to the economic arena, someone or a small group will have tomake crucial decisions about a school building, staff hires, purchases, loans, andcontracting for support services. But even where autonomy is confined toimplementation of an approved educational program, someone or some groupwill be responsible for decisions necessary to put the program in place. In eithercase, clear lines of authority must be established, and responsibilities delegatedwith care. This phase occurs after charter approval, but a chartering agency canobtain evidence of an applicants capacity by questioning those who will be

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responsible for implementation about their experience and their concerns, andrequesting information from former employers and associates about theirmanagement capacities.

The final phase is one of letting go. The applicant's leader and core team cannotdo it all. They need to recognize their skills and expertise, and limits. Above allleaders need to be able to distinguishing those areas that can and should becontrolled from those that can and should be delegated. Leaders can never giveup control where decisions have a direct influence on the school's mission orfinancial viability. All else should be delegated. As the process continues and asthe school and its staff matures more decisions can be given over to others. Insome respects this phase begins when the leader recruits the first member of theapplicant team. Throughout their interactions with applicants charteringagencies will come to appreciate the leaders' ability and willingness to delegateauthority and give up control as circumstances dictate.

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4. Charter Applicants and Other Actors inthe Private Sector

The implementation of a charter school program depends heavily on the supplyof qualified charter school operators and a network of supporting servicesprovided by the private sector. This is especially true in jurisdictions wherec haiici aui.oltudty extends to the economic arena. This section classifies thedifferent groups that may be eligible to apply for for charters, explains theirmotivations and the kinds of schools they tend to propose, and analyzes theircapacity to operate charter schools. It then discusses other private sector actorsthat charter school applicants and charter holders may draw upon for technicalsupport, professional expertise, and funds to augment their own capacities. 10

The Capacity of Charter Applicants

The scope of autonomy permitted by statute, the potential impact of marketforces on a charter school's financial viability, and accountability to charteringagencies require that charter applicants possess and demonstrate a potentiallybroad array of capabilities. Every applicant will need expertise in educationalprograms, school administration, and special education. Some will requireaccess to facilities. Many will require some financial support to hire staff, buyequipment and purchase educational materials before they open their doors, andto lease or purchase and then renovate real estate. Many will need skills inbusiness management and government operations. All must have theadministrative capacity to weave specialized expertise into a viable proposal, andlater to operate an effective school. All will need strong relationships withcommunity institutions, potentially including local banks, newspapers, andgovernment. All will need the community's good will.

10This section draws upon and extends, Marc Dean Minot with Robin Lake,Creating a Market for Public Schools: Lessons Learned from Early Implementation of the

Massachusetts Charter School Statute, DRU-xxx-IET, RAND Institute on Educationand Training (Santa Monica, CA), May, 1996.

Tab

le 4

.1

Lik

ely

Cap

abili

ties

of C

hart

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Cap

abili

tyH

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ns

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cato

rsP

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tsC

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Man

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ent

Org

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ns

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all

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Priv

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ool

Con

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ions

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lic S

choo

l

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:

7 1

BE

ST C

OPY

AV

AIL

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LE

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Depending on the types of private individuals and groups permitted to holdcharters - or work with charter holders, charter applicants may includeinstitutions of higher education; community service organizations; grassrootsgroups of educators, parents and activist citizens; relatively big and smalleducation businesses; and existing public and private schools seeking conversionto charter status. These groups will differ in motivation, the size and locationsschools of the schools they propose, and in the types of students they hope toserve.

Higher Education

Applicants from higher education, including universities, colleges andcommunity colleges, tend to be located in urban areas. They are attracted to thecharter school concept either to convert an existing program for special categoriesof public school students (generally "at-risk" groups, including potentialdropouts) in order to increase the funding of that program, or to extend theireducational mission by creating a laboratory school (often at the elementary ormiddle school level) for their education department to train teachers, developcurriculum, or study the learning process. They are likely to propose schoolswith enrollments in the area of 200 students, focused on the populations they

serve and the communities were they are located, and are not likely to showinterest in long-term expansion.

As displayed in Table 1, this group is strong in every capability required of acharter school. They have school facilities and access to funds for renovation andstart-up costs. They have a great deal of expertise in education, school

administration, business management, and (particularly in the case of state andcommunity colleges) government operations. They also have strong ties to thebusinesses, governments, and school agencies in the regions in which they arelocated, and a substantial reservoir of community good will.

Community Service Organizations

Community service organizations include nonprofit groups involved with at-riskteenagers and bi-lingual and low-income populations. These applicants tend tobe concentrated in urban areas. They are attracted to the charter school conceptas a way of extending their community service missions by integrating educationwith their existing health and social service operations. They will tend topropose schools with enrollments in the area of several hundred students,targeted to the particular populations they served.

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Many members of this group will lack facilities and capital finance. Like thesmall businesses discussed below, they tend to have no special competitiveadvantages in knowledge of the duties of public agencies, although they oftendeal with state and local agencies on a regular basis. Their expertise in educationand business management varies, but they have the administrative capacity topull together a credible proposal and some of the resources necessary for start-up. The great strengths of these organizations are their relationships with localinstitutions and the goodwill they enjoy in the community. Because their boardsof directors are often drawn from the local elite, social services organizations canrely on the support of the local institutions influenced by those members. Withthis support they are in a good position to acquire whatever capabilities theylack.

Grassroots Groups: Parents, Educators and Citizens

The great bulk of applicants will be "grassroots" groups of citizens, parents andeducators. They will come from across the state, and are bound to be almost theonly source of applicants in jurisdictions outside of the state's urban areas. Whilethis type of applicant can consist of any combination of parents and othercitizens, teachers and other educators, and are hard to categorize, the coalitionssubmitting applications will tend to be dominated by one of these groups.

Those led by local citizens are on a mission to change the system of local publiceducation. Citizen coalitions often include teachers and parents, but the leaderswill probably have some history of political activism in their communities - as theminority on their local school committee, failed candidates, or regular speakers atschool board meetings - and see the charter school option as a way to get outfrom under the tyranny of the majority.

Grassroots groups led by educators and parents may have an interest in politicalchange, but they also have more immediate motivations. They seek "a place oftheir own." Groups led by teachers and other educators seek a school wherethey can pursue their own visions of education. Groups led by parents desire aspecial place to send their own children, a place where they can take an activerole in schooling, a place they have not found in the schools operated by theirlocal district.

Although they may hope to draw students from neighboring towns, grassrootsgroups will tend not to plan to extend their enterprise beyond their localcommunities. They should be expected to express little interest in increasingenrollments at their proposed schools, although the parent-led groups haveincentives to add grades as their children grow older.

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As a whole, these groups are limited in every capability required of charterschools. They lack facilities and capital. They are more likely than not to lackadequate expertise in business management, the duties of government agencies,and - unless they are led by educators - educational programs and schooladministration. Their general administrative capacity is minimal. (Grassrootsapplicants are sometimes referred to as "kitchen table" teams because most of thework is done around one and left on it. They are sometimes referred to as "coffeeklatsch" teams when they are so amateurish that they appear not be serious.)Their start-up resources consist largely of their members' "sweat equity."

While iraiivicluais ill die group may have strong connections to local business,banking, government and the local school system, these personal ties generallywill not translate into institutional or community support for the application.Indeed as an entity, the grassroots applicant is far more likely to have a negativeor questionable standing in the community because the charter school proposal islikely to be considered an attack on perhaps the most important local institution -

the school system. A negative public perception is even more likely when thisattack on the local schools comes from a group consisting of individuals with along history of dissent from the majority view. It is still more likely when thechartering agency is not the local school board and the group receives a charter.The grassroots groups that survive these disadvantages will owe their success totheir leaders' strength of will, their group's committment to starting a newschool, and their members' abilities to tap important resources under theirpersonal control, including funds, contacts and expertise.

Education Management Organizations

Depending on the statute and their own business strategies the relatively largefor-profit "education management organizations" (EMOs) now emerging in thenascent "education industry" may pursue charters in their own right or seekpartnerships eligible applicant groups.11 These privately financed businessentities from out of state, including such firms as the Edison Project, Sabis

International, Alternative Public Schools and Advantage Schools, hope toestablish large numbers of high performing, fully-equipped and up-to-datepublic schools on a national basis. Charter school statutes offer a chance toprovethe efficacy of their school designs and/or management capabilities to schoolofficials, educators, parents and investors across the country. These firms are

11 The term was coined by John M. McLaughlin, Editor of The Education IndustryReport, a monthly newsletter published in St. Cloud, Minnesota.

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likely to be drawn to urban areas, and interested in opening schoolsencompassing grades K through 12 that would grow to enrollments of over onethousand students. They will plan to draw from the mainstream of the studentbody in the district where the schools would be located.

Like most charter school applicants, these businesses lack their own schoolbuildings. They may have the capital necessary to purchase such facilities or toengage in extensive renovations of leased facilities, and plan to provide theirschools with substantial infusions of equipment and technology. However,spending their own money on buildings would undermine their capacity toexpand and so is not part of their business planning.

Given the relatively large size of their proposed schools and their desire for highquality facilities, the national firms generally require an existing school building,and thus, in most cases, the cooperation of local school boards. Coming from outof state they also start out lacking expertise in the operations of state and localgovernment agencies, strong relations with local institutions, and the goodwill oflocal communities. As compared to other applicants, they often enjoy high levelsof expertise in educational programs, school administration, business andmanagement. However, some are still new businesses with relatively untestedprograms, limited experience in the management of schools, and start-upproblems of their own. Nevertheless, they have the administrative capacity toput together a viable proposal and start-up budgets sufficient to hire necessarylocal expertise. EMOs also have the ability to build strategic alliances with localgovernments and community leaders.

Small Business

A second group that may seek charters or partnerships with charter applicants issmall local business, built around individual entrepreneurs with prior experienceserving public school systems - providing local school districts with such servicesas the operation of community youth programs and grant writing support. Likethe national firms, this group intends to establish schools made up of studentsdrawn from the mainstream of the student body in the district where the schoolswould be located. Unlike the EMOs, this group is likely to focus on local marketsand schools with enrollments in the range of 300 students.

Members of the small business group lack facilities and capital finance.Although they have experience working with local school districts, they have notrun schools and tend to have no special advantages in knowledge of the duties ofpublic agencies. And while they have roots in the communities where theyintend to locate their schools, the goodwill and institutional relationships they

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built working with local school districts is likely to deteriorate when they decideto compete with those districts by applying to some other chartering agency.However, their administrative capacity; level of expertise in educationalprograms, school administration, business and management; and start-upbudgets are likely to roughly equal the requirements of the small schools theyhope to start.

Private School Conversions

Existing private schools can be located anywhere. Some may he narochialreligious schools, others will have no sectarian affiliation. Private schools arelikely to be attracted to the charter school concept for financial reasons -

government payments may be substantially higher than what the market willbear for private tuition, and by removing the barrier of private tuition schoolmanagers may believe they will be able to significantly increase enrollments.They are likely to propose schools with enrollments in line with the capacity oftheir current facilities, and may hope to target the kinds of students alreadyserved by their existing program.

Consistent with their financial interest in conversion, many members of thisgroup are likely to lack substantial financial resources. They may have buildingsbut lack the capital required for renovation or the operating funds for adequatemaintenance. Like the small businesses discussed above, they tend to have nospecial competitive advantages in knowledge of the duties of public agencies,although they will often deal with state and local agencies on a regular basis.Their expertise in education and business management varies but will tend to bestrong. Most will have the administrative capacity to pull together a credibleproposal and some of the resources necessary for start-up. Like the communitynonprofits, the great strengths of these organizations are their relationships withlocal institutions and the goodwill they enjoy in the community. Their boards ofdirectors may or may not be drawn from the local elite, and so the extent towhich they can rely on the support of local business and financial institutionswill vary.

Public School Conversions

Existing public schools seeking conversion to charter status may be locatedanywhere in the state. Applications will be initiated by some combination of theprincipal, teachers and parents, and are unlikely to proceed without theirsupport or acquiescence. Those behind the application are likely to be attractedto the charter school concept as a means of expanding the scope of autonomy

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already obtained under statutes permitting site-based management. They mayalso be motivated by concerns that district officials plan to close their facility toconsolidate students and staff in another building. Applicants in this categoryare likely to propose schools with enrollments in line with the capacity of theirfacilities and target the kinds of students already served by their existingprogram.

Most members this group will lack substantial financial resources, but they alsoprobably will not face substantial start-up costs. Existing public schools havebuildings, equipment, and student bodies. They have a teaching staff, parentalsupport and most likely a strong principal. Their expertise in businessmanagement will vary, but they probably have the administrative capacity topull together a credible proposal. They are likely to have substantial goodwill intheir local community as a result of their prior operations, but their institutionalties may vary with the socio-economic circumstances of the school's parents andthe political skills of its leaders.

Conclusions

The capabilities of potential charter applicants are likely to vary. Every applicantwill need some type of assistance, if only a road map for navigating thechartering process. Institutions of higher education are bound to be strong invirtually every area. Community service organizations, as well as privateschools and public schools seeking conversion, will have many strengths, butsome important shortfalls as well. Grassroots groups, who are likely to make upthe bulk of actual applicants will probably be weak in every area. In addition,they are likely to lack the funds necessary to purchase technical assistance. Bigand small business have certain strengths, but are not without weaknesses, andmay need to partner with other groups.

Other Private Sector Actors: Sources of TechnicalAssistance, Professional Expertise and Finance

Because most applicants lack at least some of the capabilities necessary to operatea charter school, they are likely to seek outside assistance. When available,applicants will make use of the services of technical assistance organizations,charter schools associations, and professional experts. Where they requirecapital, applicants will turn to private sources of finance.

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Non-profit Technical Assistance Organization s

Absent the intervention of private groups committed to the implementation ofthe charter school statute, many potential charter holders - and especially thegrassroots groups - are likely to lack adequate assistance.12 Particularly duringthe early implementation of the new charter statute, chartering agencies are notlikely to possess the full range of expertise required to advise applicants on howto plan or operate a charter school. In many cases, both agencies and applicantswill find it awkward to mix the relationship of grantor and applicant with that ofadvisor and client.

Ezrcause chaster schools are unique and new entities created by statute, thesupply of relevant professional expertise in such areas as law, accounting,insurance, real estate and even school administration in the private sector isbound to be scarce and hard to locate, and vary in quality. New charter schoolslack the capacity to realize their potential economies of scale in group purchasingand shared service contracts. In addition, charter school applicants lack a "voice"in the media and find it difficult to finance their efforts topropose and start theirschools. Under these circumstances, independent nonprofit organizationsspecifically designed to provide technical assistance in these areas have provedcrucial to the implementation of charter school statutes in many states.

The primary mission of a nonprofit Technical Assistance Organization (TAO) isto support implementation of the state's charter school statute, by providinginformation, access to professional expertise, and direct assistance to charterapplicants. In theory, the TAO's specific functions should follow from the scopeof autonomy offered by the charter school statute, the needs and capabilities ofapplicants, the availability of appropriate support from government, and the costand quality of support services from the private sector. In practice, the functionswill depend on the financial and staff resources available to the organization, thespecific skills and interests of the staff, and the capacity of the TAO's leaders tomobilize local business groups to provide professional assistance

The services provided by TAOs vary. At a minimum they generally are able toprovide applicants with: a "guidebook" to the charter schools permitted bystatute; a "critical friend" who will conduct an independent assessment of the

12 This discussion draws upon, Marc Dean Millot, A Nonprofit Technical

Assistance Activity for Charter Applicants in Pennsylvania: Mission, Functions,

Capabilities and Plans, DRU-1491-IET, RAND Institute on Education and Training(Santa Monica, CA), August, 1996.

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group's needs for specialized expertise and training; "basic training" on charterschool fundamentals and leadership; "data banks" with important information;and a "convenient forum" to exchange ideas and concerns. Chartering agenciesshould understand the content of each of these services.

The Guidebook. TAO's often will create a "road map" to help applicantsnavigate the application process. Guidebooks can be simple brochures orregularly updated loose-leaf binders. They may contain: an overview of criticalsteps and deadlines; copies of the rules and regulations on charter schools issuedby chartering agencies and other government agencies with jurisdiction overcharter schools; advice on ways to approach each major portion of the charterapplication; basic guidance on issues affecting all charter schools; modeldocuments (for applications, contracts, employment policies, etc.); a reading listof relevant materials; and resource guides on institutions and people available toprovide additional assistance.

The Critical Friend. To improve their prospects with chartering agencies, manyapplicants welcome a serious but confidential, "low-stakes" review by TAO staffof their capacity to develop a charter application and operate a charter school.The initial audit may identify an applicant's strengths and weaknesses and serveas the basis of efforts to improve the group's capabilities. Subsequent audits maytake place as the applicant proceeds through the chartering process. The criticalfriend function may continue after a charter is granted and implemented -through start-up and to at least the first "accounting" of the school's performanceunder the charter.

Basic Training and Data banks. Many TAOs offer key members of the applicantgroup training in basic aspects of charter schools and access to lists of institutionsand individuals available to provide assistance in specific areas discussed below.

A Convenient Forum. Charter applicants need a place to meet like-mindedpeople, exchange ideas, talk about their hopes and fears, start to build a charterschools community in the state, and find psychological support. Through theirtraining sessions and seminars, and sometimes meetings held for the specificpurpose, TAO's provide a physical center for people involved with or interestedin the state's charter school movement.

Additional Services. In some cases, the TAO may also provide additionalservices. Most TAO's hold seminars on major issues relevant to a charterschool's educational programs, business side, facility, and governance. Theyoften will expose applicants to issues related to the political campaign to obtain acharter, although they are unlikely to champion a particular applicant. ManyTAO's serve as informal brokers of firms and individuals offering services to

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charter schools, linking applicants to qualified specialists in education, business,and law. A few TAO's will work to develop new knowledge essential to charterschool start-up by helping professionals in education, business and law to tailortheir specialized expertise to the particular needs of charter schools. Most will doat least some research on charter schools - collecting data and studies on thenational experience and doing original work on charter applicants and schools inthe state. In a very few cases, TAO's provide direct assistance to applicants insuch areas as special education, school administration, waivers, purchasing,leadership training, and public information on charter schools.

The best TAOs will possess a brned range of capabilities. Stall members willhave detailed knowledge of the charter school statute and related state andfederal law. They will have an extensive set of contacts within andoutside thetraditional education system, and receive timely intelligenceon all mattersaffecting charter schools. They will have contacts with charter advocates, otherTAO's and researchers across the country, and thus an appreciation of issuesrelated to the implementation of charter legislation in other states. Their leaderswill have strong ties to major foundations supporting the charter concept andcredibility in the eyes of state and local media. Above all else, the leaders andstaff of a well-run TAO will have the trust of charter applicants and charterschool operators.

Because their constituency consists of charter applicants and foundations

interested in getting charter schools started, TAO's will tend to be advocates ofthe applicant's perspective. Nevertheless, many will not be unsympathetic to theneeds of chartering agencies. Moreover, a well-run TAO will be interested inunderstanding the chartering agencies' perspective, if only to better serve theirconstituents.

For similar reasons, members of chartering agencies would be well-advised toopen a dialogue with local TAOs. Leaders and staff in the TAO should serve asone important source of information, particularly on the applicants' perspective.More importantly, TAO's want the applicants they assist to receive charters.They can serve as a very efficient means of transmitting information about

chartering agencies' expectations to potential applicants. Chartering agenciesshould be particularly interested in the content of guidebooks, training activitiesand seminars, and work with TAO staffs to assure consistency withagencystandards.

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Professional Expertise

Depending on the charter statute, charter applicants and holders may requireprofessional support on matters involving law, accounting, banking, personnel,insurance, real estate, construction, building codes, public relations, curriculum,instructional services, evaluation and special education, to name but a fewsubjects. Sources of professional advice in these areas abound in the privatesector, but the general expertise of a lawyer, accountant, general contractor, orspecial education advisor must be tailored to the unique circumstances of charterschools, as it must for any other type of client. Seemingly relevant experienceelsewhere in the public or private sector needs to be considered in light of theunique and often ambiguous status of the state's charter schools. A groupseeking to begin a new small business would have little trouble findingexperienced professionals specializing in small business start-ups. During theearly implementation of a charter program, applicants are not likely to find ananalogous body of professional expertise on which to rely.

Because charter schools are new and the potential market for specializedprofessional services will be small and spread across the state, charter schoolsare not likely to develop into a distinct area of professional practice during theearly implementation of a charter statute. As a consequence, the availability andquality of professional support for charter school applicants is bound to vary.Applicants from higher education will maintain much of the required expertisein-house. For-profit applicants will acquire it as a cost of doing business. Inthese instances, professionals will be paid to learn how to apply their expertise tothe problems faced by charter schools - the quality of the expertise might varybut expertise will be available. Community service organizations and existingprivate schools will use their board members to provide or help locate and payfor the necessary advice. Public schools considering conversion and grassrootsapplicants will rely on the expertise of their members, find pro-bono assistance,or do without. In some areas, most notably special education, virtually everycategory of applicant is likely to do without unless compelled to do otherwise.

Charter Schools Associations

The limited resources of many charter school applicants and the shortage of high-quality professional expertise may lead some TAO's, charter advocates, charterapplicants and charter holders to push for the creation of a charter schools'association. The advocates of an association will propose to pool some of thefunds of charter school applicants and operators - supplemented by foundationgrants and donations - to hire various professional staff, such as a lawyer or a

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lobbyist, and/or to contract for group purchases of materials, supplies andequipment and insurance, payroll and special education services.

While informal associations will naturally develop out of group meetingssponsored by a TAO, several factors are likely to combine to retard the evolutionof these groups into formal institutions. First, the general lack of businessexpertise among charter applicants prevents many from understanding how anassociation might substantially lower the operating costs of individual schools.Applicants and charter holders are likely to be too concerned with their ownstart-up problems to devote much energy to starting another institution.

impoi Lard, political factors tend to operate against the formation of anassociation. The leaders of many applicant groups are fiercely independent andwill not submit to a process that could limit their freedom of action. In somecases, the TAO may not be prepared to cede control over its functions to anassociation.

Finally, the charter movement is highly fragmented - encompassing members ofreligious groups, voucher advocates, home schoolers, liberal activists, andmainstream educators preventing consensus on an association's politicalmission. Disagreement over whether an association should stick strictly to thebusiness side of charter school operations (i.e., lowering costs through grouppurchasing arrangements) or move into lobbying and advocacy, and fear that theformer would inevitably lead to the latter, prevents many potential membersfrom agreeing to proceed with any kind of formal association.

When they are formed, charter school associations may perform many of thesame functions as a TAO, and thus chartering agencies have similar incentives toinitiate a dialogue with these groups. Chartering agencies should judgeassociations by the same criteria they apply to TAOs, plus one more. Where anassociation claims to speak for the state's charter applicants or charter holders,agencies needs to review their bona fides with some care. Associations should becontrolled by their members, their membership should be broad-based, and theiragenda should be focused on issues that relate to the interests of all charterschools.

Private Finance

Where charter statutes permit the creation of new public schools, access toadequate financing will be many charter school applicants' biggest problem.Once a school begins to teach students in the classroom, some statutes do permitbanks to loan charter schools funds secured by the government's regular

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operating payments to charter holders. Such arrangements help stabilize anoperational school's cash flow. However, most statutes do not make substantialgovernment funds available to help charter holders open their newly approvedschools. With the exception of higher education, most applicants will requireoutside, private support to finance the capital expense of renovating their newschool facilities. And while for-profit firms and higher education can rely ontheir reserves to finance the costs of hiring staff and purchasing supplies andequipment before opening their new schools, most other applicants will beforced to seek outside funds.

Start-up funds - to hire and train staff, purchase materials, make down paymentson equipment and pay retainers to secure professional services before the schoolopens - are not widely available. Capital funds for extensive renovations are

virtually nonexistent. States and chartering agencies may choose to transfer stateand federal funds designated for charter school start-up to charter holders, butthe amounts are not likely to be sufficient for the purpose. While someapplicants will prove remarkably successful in their efforts to raise funds fromfoundations, many more will not.

To date, banks have been reluctant to provide long term loans to charter schools -

the kind of loans necessary for capital expenditures, especially for the purchase,renovation and construction of attractive and sizable facilities. Loans for a termlonger than a holder's three to five year charter appear risky. The new schoolshave no track record for bankers to use as a baseline when assessing loanapplicants as potential charter school operators. The political controversysurrounding charter schools will generate a certain political risk that manybankers will be reluctant to accept. The charter school statute could be repealedor amended in a way that will jeopardize repayment.

In addition, many applicants lack business and administrative expertisecomparable to that of other potential borrowers. Most applicants lack bothadequate collateral and the additional cash necessary to fund their own portionof capital costs. (Banks might lend seventy percent of the value of real propertyand thirty percent of the cost of renovations to a leased property; the borrower isexpected to come up with the rest.) Moreover, school buildings are not attractiveinvestments. They are expensive to build because they often must meetspecialized codes, and difficult to sell. In the event of default a bank might findthat the commercial building it poured so much money into to convert to aschool is worth less on the market as a school than it had been as unrenovatedcommercial space.

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Banks are also uncertain about the public relations benefits of loans to charterschools. While a bank's management might be motivated to make a loan in orderto demonstrate its interest in the community, the positive image would quicklyspoil if it were forced to foreclose on the school. Moreover, where communityattitudes towards charter schools are mixed, a loan to a controversial schoolmight not generate a positive public image for the bank.

The shortage of capital finance will force most applicants to smaller facilities,defer work that might make the facility more appealing to students and parents,and focus on renovations essential to meet code requirements. In most cases,chartering agencies should expect renevatic_In5 to tee financed Out of short-term

loans made in anticipation of operating revenues or as piecework paid for out ofoperating funds as money becomes available and after work is completed.

If chartering agencies are serious about implementing the charter statute, theyshould open a dialogue with private banks. Agencies need to assure lenders thatschools that perform have no reason to fear for their charters and that the agencywill not grant charters to applicants that lack sound proposals. They need toeducate lenders about charter schools and the process the agency has devised toassure quality schools. For their part, agencies need to work with the banks tolearn about their lending procedures and criteria, and use those same approachesto the maximum extent feasible when they consider the business aspects of acharter application.

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5. Functions and Capabilities of aChartering Agency

This Section describes the specific functions of a chartering agency and thecapabilities required to carry them out.

Chartering Agency Functions

To fulfill the purpose of the charter act and assure the success of their ownprograms, agencies first need to provide public notice of their intent toimplement the charter school statute. They then must review applications andapprove charters. After approval, they need to monitor the operations of charterholders. In the course of establishing the first charter schools, agencies shouldconsider providing both technical assistance to applicants and contract servicesto charter operators. Once schools are up and running, the charter agency willhave to work with other agencies and the private sector to create a supportiveoperating environment. Where charter holders cannot meet performancerequirements, chartering agencies have the responsibility to terminate theircharters.

Inform the Public

Because the statutes generally place chartering agencies under no obligation togrant charters, perhaps the first function of a chartering agency is to providenotice of its intent to implement a charter school program. By means of pressconferences, interviews with local media, public meetings and officialcorrespondence, as well as legal notice in newspapers of record, the agencyshould make clear its plan to make use of the charter statute and the basicrequirements of the law. Announcements should indicate the agency's generalimplementation strategy, for example to make a good faith effort to approveunsolicited charter applications, seek out partners to develop some number ofnew schools, or approve certain kinds of educational programs or schools forcertain categories of students. Agencies should consider soliciting the opinionsof the general public as well as individuals and groups they consider to be strongpotential applicants about an appropriate process and criteria for charter

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decisions. They also should consider encouraging the most qualified potentialapplicants to develop applications.

However they arrive at decisions about their charter program, charteringagencies should develop a formal Request for Proposals (RFP). The RFP shouldexplain the agency's plans for implementing the charter statute. It shoulddescribe the process the agency will follow in its decision making, including itstimetable, important deadlines, decision procedures, and the rights andobligations of eligible applicants. The RFP should contain a copy of theapplication form and describe requirements concerning the types and detail ofthformation expecied ul applicants, and the nature of evidence required tosubstantiate an applicant's claims and representations. The application formshould contain every item of information demanded of applicants by the charterstatute, and such additional items as the agency deems essential to judge thequality of the applicant's proposed school. The RFP should identify the criteriathat will guide agency judgments about the people, programs and planscontained in the application. It should also contain copies of the charter schoolstatute; rules and regulations developed to implement the statute; and the basiccharter document.

Review Applications and Approve Charters

Having made the political decision to grant charters to qualified eligibleapplicants and notified the public of that decision through media events and theRFP, the chartering agency's next function is to review and approve charters. Toperform this function, the agency needs to develop a review process, approvalcriteria, and the flexibility to employ the process in ways that honor the agency'spublic trust responsibility to children, promote the practice of due diligence byagency personnel, and are faithful to the agency's good faith decision toimplement the charter statute.

The chartering process is a largely a matter of time management. The processmust permit sufficient time for the agency to conduct a thorough investigation ofapplications and applicants, for applicants to make any appeals offered by statelaw, and for those granted charters to open their doors to students in time for theupcoming school year. In many cases a basic timetable specifying when initialagency rulings and appellate decisions must be made will be mandated by thecharter statute.

To promote effective decision making, chartering agencies need to seriouslyconsider the order, kinds and detail of information they will need during thereview process and identify those requirements in the RFP. Applicants need a

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clear understanding of the burden of proof they will bear. The process shouldgive applicants informal opportunities to identify potential agency concerns andproblems before they submit a formal application and find themselves in formalhearings.

Formal hearings on charter applications, including presentations by theapplicant, are often required by law. In any case, they should be held regardlessof the charter statute's requirements. Formal hearings enable applicants topresent themselves to the public, allow for public comment on the application,and help provide a public record of agency decision making . They also give themembers of chartering agencies the opportunity to assess the public image of thepeople behind an application and their understanding of the proposededucational program, business plan and governance structure.

Chartering criteria are stated or implied by the statute and informed byprofessional knowledge of the substantive area in question. Information thestatute requires applicants to provide in their application and thescope ofautonomy offered to charter holders in the charter law serve as bases for thedetermination of criteria. The latter constitute simple criteria involving little ifany judgment. For example, applicants may be required to list their names or toagree to adhere to government auditing procedures. If these requirements arenot addressed in the application, the charter cannot be approved; if theinformation is included, the chartering agency can consider the application.

The scope of autonomy offered by the statute implies substantive criteria forcharter approval. Specific criteria of this nature have been discussed in greatdetail in Section 3 of this guidebook. For example, if the applicant will beresponsible for implementing an approved educational program, the charteringagency ought to be convinced that the proposed program has general merit andis appropriate for the student body targeted, that availableresources will beadequate, and that the proposed staff are qualified to implement the program.The extent to which the program, resources and staff are credible is a matter ofjudgment, but that judgment is bounded by the norms of professional educators.The criterion is whether professional educators would generally agree with theapplicant. Similar criteria apply to judgments about the business plan, financialmanagement systems, proposed facilities and construction, and compliance withrelevant laws and about the staff responsible for these areas. Business people,certified public accountants, construction managers and lawyersare qualified tomake these judgments, and agreement by experts in these area should constitutecriteria for charter approval.

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Chartering criteria are also implied by the completed application itself. Themission and the vision proposed by the applicant are benchmarks for the rest ofthe application. The educational program, the proposed student body,governance structures and many other elements of the application must beconsistent with the mission and vision. If the applicant proposes certaineducational standards, the proposed assessments must be able to demonstrateperformance against those standards. An application that lacks coherence andconsistency should not be approved. Similarly, where the school is an economicentity, a balance of expenses and revenues is a benchmark for the rest of theprogram. If some important category of expenses has been neglected in theapplication, the applicant must demonstrate that the program remains financiallyviable and educationally significant after the matter is addressed.

The agency's flexibility in carrying out the review and approval process andapplying its criteria will strongly influence its ability to implement a charterprogram and fulfill the agency's intent. Until charter schools develop asubstantial track record and agencies become experienced administrators ofcharter school programs, agency members must recognize that they are engagedin an experiment. Experiments in public education require a constant balancingof competing objectives. The review and approval process must allow thechartering agency to act in the best interests of children who will attend theproposed school as well as the taxpayers who are funding it. But the agency isnot only obligated to protect today's children and taxpayers from poor charterschools. Perhaps the most important objective of charter school statutes is toimprove educational performance for tomorrow's students. To advance thisgoal, the agency must be prepared to accept innovative proposals based onlimited evidence. Thus the practice of due diligence by agency personnelinvolves looking for a basis to approve innovation as well as disqualifying faults.

Provide Technical Assistance to Applicants

In many cases, charter statutes permit or require chartering agencies to provideassistance to charter applicants. In an ideal world the technical assistanceprovided by chartering agencies to charter applicants would not go muchbeyond the information contained in the RFP and informal discussions withapplicants discussed above. Agencies ought to help applicants understandmatters of form, process and criteria. But the basic bargain of charter statutes isautonomy for accountability, and agency advice on the substantive content ofapplications can undermine the independence of charter holders. The acceptanceof such "advice" is bound to be perceived by agency and applicant alikeassomething akin to a criterion for charter approval. Once an agency begins to

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provide substantive advice to applicants, it is on the edge of a "slippery slope"towards a new form of central control over individual public schools.

In an ideal world most applicants would be able to submit a charter applicationwhich is fully responsive to the RFP, relevant professional expertise would bewidely available to charter applicants, and TAO's would possess all thecapabilities necessary to educate and support potential applicants. In an idealworld agencies would have considered every contingency and establishedunfailingly appropriate deadlines and procedures for charter approval. Theywould communicate an unambiguous set of expectations to charter applicantsand be required only to judge proposals.

In practice, the world of charter review and approval is not ideal, particularlywhen the charter law has just been passed and the charter program is firstimplemented. Applicants will vary in their capacity. None will have the full setof required capabilities. Professional expertise and TAO support will vary inquality. The chartering agency will not have a flawless set of procedures andcriteria, or a clear set of expectations. During this phase, knowledge relevant tothe creation of an effective charter school system will be scattered amongpotential applicants, those forming TAO's, professionals in related disciplines,academic researchers, activists in education reform, and the members and staffsof chartering agencies. Members of chartering agencies must be alert to theslippery slope, but trying to enforce an unrealistic "arms-length" relationshipbetween applicant and agency by withholding substantive advice during earlyimplementation can also be detrimental to the charter program.

In practice, chartering agencies will sometimes be in the best position to rendersubstantive technical advice to potential applicants. They may have expertise incurriculum and instructional strategies, standards and assessments, demographicinformation, experience in compliance with the laws charter schools may besubject to, and relationships with other agencies with jurisdiction over charterschools. Refusing to give advice in these areas of expertise may retard thedevelopment of charter schools.

Until proven effective, the charter school program is an experiment. Individualcharter schools are laboratories for change requiring input from multiple sourcesof expertise, and open communication among these groups. Chartering agenciesmust be prepared to deliberately blur the distinctions between the regulator andthe regulated in order to advance understanding of the charter school option. Inkeeping with this spirit, agencies should also be prepared to consider and acceptadvice on their own role and functions during this period.

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Nevertheless, there are lines charter agencies should not cross. They should notwrite an applicant's proposal. The more substantive advice an agency supplies,the less confident it should be in the applicant's capacity to operate the proposedschool. Nor should they concede their responsibility by deferring to others onimportant substantive matters of review, approval and oversight. Charteringagencies must remain diligent in their efforts to review the quality of applicationsand establish reasonable criteria for charter approval.

To advance community knowledge of charter schools, chartering agencies shouldembrace opportunities to exchange ideas. They shouldsponsor and participate

3rkshop's on various aspeci5 of the charter school concept.They should contract with experts to apply experience in other jurisdictions totheir own particular circumstance. They should provide support to professionalsinterested in adapting their specialized expertise to the needs of charter schoolsand chartering authorities. They should consider forming partnerships withlocal foundations, education researchers and the business community to createthe conditions necessary for a successful charter school program.

Monitor Charter School Operations

Once charters have been granted, the chartering agency's responsibilities shiftfrom the quality of an application describing a proposed school, to theimplementation of the approved plan and the performance of the operationalschool. The nature and extent of oversight should depend on the scope ofautonomy offered to charter holders by statute, reporting and inspectionrequirements contained in the charter law, similar requirements charter schoolsmay be subjected to under categorical grants and special state programs, andbenchmarks established in the application. Agencies need sufficient informationto provide warning of potential crises but must not unreasonably burden charterholders or deprive them of the discretion they need to implement their approvedcharter.

Charter operations are monitored by three means: written reports provided bycharter holders; inspections conducted by chartering agencies; and investigationsof informal and formal charges of violations of law. Chartering agencies need tocreate systems to manage each of these oversight mechanisms .

Reports

The broader the scope of autonomy offered to charter holders, the broader theprobable array of reporting requirements established in the charter statute. Moststatutes require charter holders to produce some form of annual report and to

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submit certain other reports on forms supplied by state agencies. The principalreporting requirement for a charter school whose autonomy is limited to theimplementation of an approved educational program at an existing public schoolwill be the results of student assessments proposed in the charter applicationorrequired by the standards and testing provisions of the state education code. Anew school where autonomy extends to economic decisions and governmentdecision processes, located in a private facility, will have to produce a certificateof occupancy for the building, an annual budget, periodic reports on enrollment,and public records of significant purchases, to name but a few likelyrequirements. Schools that accept government funds for economicallydisadvantaged or special needs students will be required to meet additionalreporting requirements set by the agencies that disburse the funds and overseeprogram implementation. Schools that hire their own staff may be required tosubmit teaching certificates to chartering agencies andeven background checksconcerning criminal records and incidents of child abuse. Moreover, schoolswith significant private loans may have to provide periodic financial data tocommercial lenders.

Problems can arise when chartering and other education agencies with oversightresponsibilities for charter schools hold charter operators to precisely the samereporting requirements as the traditional school system managed by schooldistricts. These regulations have been developed by one large state bureaucracyto oversee many other large district bureaucracies. The regime is likely to beinappropriate for charter schools.

Charter schools are small public institutions. They lack the staff necessary toassure compliance with the myriad regulations developed for largebureaucracies. Subjecting them to such rules places them in a regulatory straightjacket, deprives them of flexibility, engenders contempt for the law, and risksmassive noncompliance. Yet the people operating charter schools are just asflawed as the rest of society; and the risks of waste, fraud and abuse in charterschools are no less than for the rest of government.

Chartering agencies should consider three ways of addressing excessivebureaucracy in the oversight of charter holders. The first is to make use of themanagement information systems that charter holders must employ to controltheir school's operations. Good management information systems shouldprovide clear information on the progress a charter holder is making towardsperformance benchmarks described in the application and the warning desiredby both competent managers and chartering agency personnel. Agencies shouldassure themselves that applicants have such systems before granting charters.

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Chartering agencies also should insist that the information systems proposed byapplicants can readily produce the reports required by law. Where the form andcontent of reports required by the state cannot be changed, chartering agenciesshould not allow applicants to get in a position where the production of thesereports is onerous because they chose the wrong software. The state'sinflexibility should not be compounded by the applicant's.

The second approach to reducing the effects of bureaucracy is for the charteringagency to make the best use of information charter holders are already requiredto produce by law or circumstances, instead of adding new governmentreporting requirements. For example, a chartering ageitcy may not be the agencythat transfers operating funds to charter school, nevertheless it should be able touse the same student enrollment form that charter holders produce to receivetheir periodic payments. Where a bank has required a school to provide regularfinancial reports as a condition of a loan, the chartering agency should use thosereports rather than insist on a different form. Better still, chartering agencies,banks and government auditors should collaborate to develop commoninformation requirements for charter schools.

The third approach is to streamline existing regulation. Chartering agenciesshould look to the underlying purpose of a regulation and tailor means ofassuring compliance to the capacity of the charter school and the nature of thecharter school market. For example, it is possible that the abuse of governmentprocurement activities by charter school personnel can be prevented byregulations less complex than those used for a school district.

Inspections

Many charter statutes prohibit charter holders from interfering with inspectionsby chartering agencies and other government agencies whose responsibilitiesencompass charter schools, and give those agencies relatively unrestricted accessto charter schools and their records. Inspections of physical facilities and recordsare a necessary component of any complete audit, whether it concerns theeducational program, business operations, facility safety, or government decisionprocesses. To assure that charter holders are complying with the terms of theircharter, the law and acceptable management practices, it is necessary to spotcheck student records for accuracy; compare canceled checks with checkregisters, books of accounts, and receipts for purchases; check fire alarms; andreview the publicly available records at the school for the minutes of openmeetings.

Because inspections can place substantial demands on a charter school's smalladministrative staff and may require the presence of people who do not normally

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work at the school (e.g., the board of trustee's finance committee, the treasurer,part-time bookkeepers, and off-site accountants), advance warning should begiven to charter holders. As a rule, inspections probably should be scheduledmonths in advance. Charter holders should be made aware of the purpose of theaudit, the information required, the people who should be made available to theinspection team, and the length of the inspection. Only when the quality ofperiodic written reports regularly provided to chartering agencies deteriorates orcredible reports of serious violations come to the attention of agency personnelshould surprise visits be considered.

Investigation of Reported Violations

As a rule, chartering agencies do not have substantial personnel resources todevote to the oversight of charter schools and rely on reports of potentialproblems from third parties. In some cases, charter statutes specify proceduresfor dealing with grievances with charter schools.

Where local school boards are chartering agencies, the personal contacts ofmembers and staffs, district-wide networks of parent-teacher associations andteachers' unions, and the public's association of public school matters withschool districts create numerous opportunities for people with grievances againsta charter school to make their concerns known to the proper authorities. Butwhere the chartering agency consists of a small staff located in the state capital ora regional state college, those with problems may not know where to complainand potentially serious violations may not come to the attention of agencypersonnel. In these cases, chartering agencies need to create more formalsystems for reporting violations of charter law. Since local school districts aremost likely to hear about problems in the charter schools, chartering agenciesshould identify points of contact for superintendents and local school boards tocontact when potential violations come to their attention.

Charter schools probably should also be required to describe complaintsprocedures in their annual report or descriptive brochure and to list thetelephone number and address of chartering agency personnel responsible forinvestigating complaints. In the event of an investigation, the agency shouldgive charter holders notice of the complaints made against them, the status ofinvestigations, an opportunity to address the matter, and the right to defendthemselves before the agency makes any formal decision or takes action thatjeopardizes the charter holders' interests or status.

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Create a Supportive Operating Environment

Unlike private schools, charter schools do not stand alone. Charter schools maybe more or less autonomous, but all exist within a larger system of publiceducation. Regardless of the scope of their autonomy, all require that system toprovide a supportive operating environment.

Where local school boards are the chartering agencies and the charter statuteextends autonomy only to the implementation of an approved educationalprogram, a charter school's success will be influenced by personnel and budgetdecisions made by the central office, the superintendent: and thp sue! t_-,01 bc;ard.

Wrteie he charter taw allows a district to expand the scope of autonomy to theeconomic arena, the charter school may still depend on the district for payrollservices, food service, and collective bargaining. Even where the charter schoolis chartered by an agency other than a local school board, the school may rely onthe district for transportation services, and will have important relationshipswith a range of state education agencies in addition to the chartering agency.Charter schools dealing with special needs students will fall under thejurisdiction of state agencies responsible for special education. Charter schoolsmay be required to submit periodic proof of enrollment to receive payments fromthe state treasury. As public employers, the boards of trustees of charter schoolsmay fall within the jurisdiction of the state public employee labor relations boardfor the purpose of collective bargaining and employee grievances. As publicemployers they may be responsible to state pension systems.

Having chartered a school, chartering agencies have an obligation to make theirbest efforts to see it succeed. Where they control aspects of the charter school'soperating environment that are essential to its ultimate success, charteringagencies should act in good faith to support the school. Where a charter school'sautonomy is confined to the educational program, school boards should assurethat staff members opposed to the proposal are transferred to another school;that the children of parents opposed to the proposal are given alternatives; thatstaff members essential to implementation of the program are kept in place; thatappropriate waivers are granted or sought from other agencies or the localunions, and that adequate resources are made available for necessary trainingand materials.

Where charter schools are more independent of school districts, but subject toreporting requirements to state education agencies or fall within theirjurisdictions, they may rely on the local municipality for a certificate of

occupancy, the local district for transportation, the state treasury for timelypayments, and the state department of education for the release of funds to

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support economically disadvantaged students or those with special needs. Inthese instances, chartering agencies must be prepared to act as advocates forcharter schools, arguing for streamlined reporting requirements or explainingwhy charter schools should be treated differently from other institutions, andhelping to devise alternative administrative approaches for the new schools.

The operating environment of charter schools with control over economic andbusiness decisions includes the private sector, and particularly private lenders.Chartering agencies have some obligation not to obstruct charter holders effortsto obtain loans by inaction. Charter agencies should be prepared to grantcontingent charters, subject to the holder obtaining an appropriate facility, tohelp otherwise qualified applicants obtain the financing they need to purchaseand/or renovate a school building. Agencies should also be prepared to supportlenders' efforts to obtain security interests in charter school payments as acondition of loans designed to assist the cash flow of operational charter schools.

Provide Contractual Services to Charter Holders

By mutual agreement of the parties or as required by the charter law, charteringagencies may also provides services to charter holders. The most likely scenariois for school districts to provide transportation, property rental, facilitiesmanagement and food services to schools they charter. (Districts also mayprovide services to schools chartered by other agencies - transportation and foodservices are typical.) Other chartering agencies may also provide charter schoolswith services for fee, such as the percentage of state payments to charter schoolsthat some state universities receive to monitor the operations of the schools theycharter.

Where charter schools are not required to contract with chartering agencies forservices, they will quickly learn whether they are receiving value for money andseek alternatives as soon as they are able. But even where the agency receives afee determined by the charter statute, for example as a portion of the charterschool payment retained for oversight or rent, its good faith promise not to get inthe way of a charter school's success should dictate that the agency give the bestservice possible.

Terminate and Renew Charters

Where charter holders are unable to make meaningful progress towards theireducational goals, schools skirt insolvency, or a pattern of serious violations oflaw is uncovered, statutes give chartering agencies the right to terminate the

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charter, and close down the school or turn it over to new management.Chartering agencies also have the right not to renew charters when they expire.Where reasonable administrators of charter programs would agree that a schoolis a failure, charters should be terminated or not renewed for the good ofstudents, to protect the taxpayers, and to send a signal to other operators.

In an ideal world the threat of termination or nonrenewal should be an effectivedeterrent to poor management. In the real world, they are difficult threats tocarry out. Either, but particularly termination, require gross mismanagement ordishonesty before they become politically justified. Before an operator reachesthat point, chartering agencies will encounter problems which are uuubiesome,and which in retrospect will be considered strong indicators of failure, but whichat the time will seem to be an insufficient basis for raising the prospect oftermination. But unless the agency has established standards of adequateperformance that fall between total success and complete failure and sanctionsthat fall between informal criticism and formal termination, it runs the risk ofultimate disaster or - worse still - mediocre charter schools. Chartering agenciesneed oversight systems that establish clear warning to charter holders of a needto address specific problems before they grow to threaten the viability of theschool or rob it of vitality .

At least during the early implementation of charter school programs,intermediate interventions by chartering agencies should not be confined towarnings and sanctions. Agencies should also provide direct assistance tocharter holders, in effect bringing additional human and financial resources tobear on the problem at hand. This approach is consistent with the fact that,atthis stage, charter programs are experiments. At first, applicants are unlikely toget everything right, and agencies do not know enough to identify and screen outproblem applicants during the review and approval process. Technicalassistance is needed to help the first schools become successful, to allow theexperiment to continue, and to help the agency understand likely problems andwarning signs for future reference. As the agency becomes more experiencedand charter schools more numerous, it should be able to keep unqualifiedapplicants out of the charter school program and rely more on intermediatesanctions, but direct assistance should never be ruled out as an option. Before acharter is terminated, chartering agencies should be able to point to a history ofwarnings, sanctions and assistance to address problems that ultimately led tofailure.

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Required Capabilities

Chartering agencies require substantial capabilities to carry out the functionsdiscussed above. They need detailed knowledge of the charter statute andrelated state and federal law. They must have access to functional expertise tojudge quality of applications and operations. They must appreciate issuesrelated to the implementation of charter legislation in other states. Charteragencies need to establish relationships with other government agencies, TAOs,foundations interested in the charter concept, and the banking community. Andfinally, they require the trust of charter applicants and charter holders.

Detailed Knowledge of the State Charter School Statute andRelated State and Federal Education Law

The starting point for all chartering agency functions is the law. The members ofchartering agencies must master the various provisions of their state's charterschool statute. They must have a solid understanding of those other portions ofthe state education code that charter schools must follow, or from which theymay receive waivers. As the charter statute is implemented, agency staff need tokeep abreast of: the status of amendments under discussion or enacted by thelegislature and their effect on the charter program; the rule making of otheradministrative agencies with responsibilities under the statute, theirinterpretations of the new law, and the implications of those interpretations forthe charter program; and the disposition of cases challenging the charter statutein the courts.

In addition, agency staff need to become familiar with important aspects of stateeducation law relevant to charter schools and agency oversight of charterprograms. These may include, but are unlikely to be confined to: the financingof public education, the teachers' retirement system, public sector labor relations,the open meetings act, and possibly even the state election code. Staff need tounderstand, or have ready access to people who understand, this body oflegislation, administrative decisions, and case law. They should be prepared toassess this law with an eye towards the needs of the charter program, balancingthe twin goals of assuring that charter holders enjoy substantial autonomy overdecisions essential to the success of their approved programs and maintainingcharter holders accountability for their performance to government. Agency staffmay also need a general awareness of, and access to specialists in, other state law,including government contracting, liability and insurance, labor relations,building and zoning codes, and private sector finance. Where charter approvaland termination are subject to state statutes governing the decisions of

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administrative agencies, agency staff must have a firm grasp of the proceduraland substantive requirements of that body of law

The staff of chartering agencies also should understand federal education law,including legislation creating the various categorical programs and grants, andthe administrative procedures governing their distribution. They should knowwhether charter schools are located in jurisdictions subject to desegregationorders or signed consent decrees, and have ready access to government attorneysknowledgeable in federal civil rights laws relating to public schools.

Functional Expertise to Judge the Quality of Charter Applicationsand Operations

The chartering agency's capacity to implement the charter statute depends on anappropriate number of adequately trained personnel. Personnel training mustmatch the scope of autonomy offered to charter schools by the statute. Forexample, if the statute permits charter holders to operate an independenteconomic entity, personnel engaged in the review and approval of applicationsmust be able to determine whether the business plan is sound. (Specific expertiserequirements for each area of charter autonomy have been discussed earlier inthis section as well as Section 3.) Personnel numbers depend on the number ofcharter applicants and holders, the time allotted for administrative processes,and the amount of evidence necessary for the chartering agency to make effectivedecisions. Whether these personnel are full-time staff, consultants, volunteers, orsupplied under contract by a firm retained to perform specific analyses or reviewthe entire application is up to the chartering agency.

Chartering agency staff also need to pay close attention to the experience of earlyimplementation of charter legislation in their jurisdiction. Where the autonomyof charter schools extends to the economic arena, agency staff must work hard tobuild experience on the business side of charter school start-up. They shouldknow which banks are prepared to work with applicants, and which loanapplications were approved or rejected, and why. They should have copies ofproposed and actual contracts between potential charter operators and staff,vendors and service providers. They should have copies of new charter schools'actual policy handbooks. They should keep up with applicants' efforts to obtainand renovate suitable space. They should remain well-informed of applicants'efforts to raise money to defray start-up costs. This information is important tothe oversight of charter holders, but building a chartering ageny's businessexpertise it is at least as important to the review and approval of new charterapplications.

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An Appreciation of Implementation Issues in Other States

When a charter school is first signed into law, technical advice on itsimplementation will have to be based on the experience of other states, filteredthrough a charter agency's understanding of local conditions. This is not asimple matter. Charter schools are a relatively new phenomenon in the UnitedStates; key provisions of charter school statutes vary widely; and every state withcharter school legislation has a unique economic, legal and political tradition."Expert" opinions on the nature and purpose of charter schools, and appropriatestandards of charter school performance, are mixed. As a result, the experienceof no state, chartering agency, individual charter school, or individual involvedwith a charter school will serve as a perfect analogy. But there is an experience,and it should be examined and analyzed by agency staff.

Understanding the implementation problems faced by different types of charterapplicants in different states, the status of issues faced by every applicant inevery state, the alternative approaches to their resolution of these problems, andreviewing their relevance to implementation of the new charter law, should be ofhigh priority. To obtain and maintain this understanding the agency mustengage in outreach activities. It needs to establish strong working relationshipswith chartering agencies in other states. It should keep informed on the work ofnational education reform networks and access informal charter school groupson the Internet. It should build ties to policy analysts interested in charterschools and operating at the local, state and national levels. The agency shouldbecome involved with the various regional and national conferences sponsoredby those who make up the nascent charter school movement. And it shouldconsider sponsoring research on the problems of early implementation of charterprograms.

Relationships with Other Government Agencies, TAOs,Foundations, and the Banks

Chartering agencies have the power to give applicants an opportunity to createpublic schools, but the contractual relationship between chartering agencies andcharter holder is only one of many necessary to the success of a charter program.Under most statutes, charter schools operate within a larger environment ofgovernment regulation and private sector support. Chartering agencies need toappreciate that these relationships are important. More important, they need totake the initiative and establish their own relationships with these other publicand private sector actors. Several such relationships were identified in thediscussion of chartering agency functions.

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Other government agencies, which may be skeptical about or unfamiliar withcharter schools. The chartering agency needs to explain the objectives of charterlaw and its charter program, but recognize the responsibilities of its sisteragencies. In the final analysis, where a good faith commitment to work thecharter problem has been made by a sister agency, the development of a positiverelationship depends on the chartering agency's willingness to provide staffassistance.

Technical Assistance Organizations, which represent the interests of charterapplicants and others who favor the establishment of charter schools. Agenciesshculd apprcciate the TAO's role in irdnsmitting information to applicants andthe broader charter school movement. They should also appreciate theTAOsunderstanding of general trends in the applicant community. A workingrelationship with a TAO does not require that the two parties agree on matters ofpolicy governing the charter program. It does require that the TAO believe theagency intends to implement a charter program in good faith and will listen tosuggestions. Perhaps the best signs of good faith are for the agency to initiatediscussions as soon as it decides to go ahead with its charter program, solicitTAO input while the program is being designed, and share appropriateinformation with the TAO as a matter of course.

Foundations, which can provide critical resources to fill gaps in agency andapplicant capabilities, and support the formation of TAOs. Local and nationalfoundations may favor charter programs or be waiting for a signal from thechartering agency. Once an agency has decided to proceed with a charterprogram, it should let its foundation supporters and others know. Whiledesigning their charter program, agencies should work with the foundations toidentify particular needs that private philanthropy might fill. Foundationsupport for studies of implementation issues in other jurisdictions; workshopsand training materials; and the development of technical expertise to supportagencies review and approval of charter applications might be particular helpful.

Banks and professionals, whose support will be essential where charter schoolsare autonomous economic entities. Beyond announcing an intent to go aheadwith a charter program, agencies should invite members of the private sector toparticipate in the design of the charter program and any workshops or trainingsessions the agency offers. The agency will need the input of business peopleand business people will gain from a better understanding of agency interestsand concerns. It is particularly important to open a dialogue with the banks, andto work to match an applicant's business plan requirements as closely as possibleto lenders' information needs.

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The Trust of Potential Charter Holders

Without the trust of individual charter applicants and holders the agency cannotimplement a successful charter program. Before qualified applicants will makethe very substantial investments required to start a charter school, they mustbelieve that the agency is committed to making the charter program work andwill make its best efforts to create a supportive operating environment for theirnew schools. To develop an effective charter program during earlyimplementation of the law, agencies must identify and address problems quickly,which requires that applicants and holders be willing to expose their faults to theagency staff.

For chartering agencies, whose responsibility for an effective charter programruns first to students and taxpayers, gaining the trust of applicants is not a matterof keeping secrets. It is fundamentally an issue of empathy and good faith.Starting a new charter school is enormously difficult, and particularly forgrassroots applicants lacking adequate resources and facing local politicalopposition. The pressures on these educational entrepreneurs are very real, andcan strain their marriages, friendships and business relationships. The ability toweather crises will spell the difference between failure and success for many ofthe first charter schools. Applicants and holders need to know that a charteringagency wants the charter program to succeed, and will make its best efforts towork with a charter holder genuinely trying to create an effective school. Agencystaff will require strong interpersonal skills.

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6. Advice for Chartering Agencies

1. Undertake a serious study of the requirements beforedeciding to implement a charter program.

Charter programs are complex and problematic. They require a politicalcoraraitment to see the program through inevitable crises, deal with agencies andgroups opposed to charter schools, turn away unqualified applicants who mayhave political clout, work with problem charter holders, and close down schoolsthat may have a political constituency. Most chartering agencies will need toacquire new types of expertise. All will require new management systems forthis program. Improvements in student performance may not be demonstrablefor several years after program initiation. The eventual payoffs may betremendous, but as yet this assertion by advocates is unproved. Charteringagencies should approach the charter option with an open mind, but must take ahard look at the costs and risks of a program, and evidence of success elsewhere,before determining that they should proceed.

2. Do not implement a charter program unless you areprepared to make your best efforts to see it succeed.

Having decided to implement a charter program, chartering agencies need tomake it clear to the private individuals and groups that may hold charters thatthey will do everything reasonable that is necessary to help charter schoolssucceed. Chartering agencies must be prepared to change their own practices toaccommodate the needs of the schools they charter and to provide requiredsupport where the scope of charter schools autonomy is narrow. They must becommitted to providing charter schools with value for the services charterschools purchase. They must be ready to act as an advocate on behalf of charterschools with other government agencies and the private sector.

3. Invest in expertise equal to the scope of autonomythe charter statute offers to charter holders.

Charter school law grants charter holders the right to implement an approvededucational program, may give them control of the schools economic and human

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resources, and may establish charter schools as independent agencies ofgovernment. Charter applicants provide evidence of their capacity to exercisethis autonomy in their application. Charter holders demonstrate their capacity asschool operators. To determine whether the evidence provided by applicantsand school operations under a charter are sufficient requires that a charteringagency have the substantive capacity necessary to such judgments. Expertise ineducational programming, school administration, businessmanagement,financial controls, and legal compliance need not reside with theagency staff, butthe agency needs more than casual access to such expertise.

4. Be prepared to render technical advice.

Chartering agencies should want their programs to succeed and charter holdersto have access to substantial relevant expertise. In an ideal world the regulatorwould not also tell charter applicants and operators how to write theirapplications or operate their schools. In the real world, particularly during earlyimplementation, agencies must be prepared to give substantive advice.

5. Remember that it is easier to weed out problemapplicants than to deal with problem charter holders.

Chartering agencies have the right to terminate the charters of ineffective schools,and should devise intermediate means of intervention in failing schools. Someschools will have difficulties, and during the early implementation of a charterprogram at least some of these schools will be difficult to identify in the

application phase. Nevertheless, chartering agencies should learn enough aboutthe experience of other chartering agencies and the capabilities required ofcharter applicants under their own charter statute to build a list of "warningindicators," suggesting potentially problematic schools.

6. When deciding whether to grant a charter, give equalweight to people, the program and the implementationplan.

A functioning charter school, likely to improve student performance, requirespeople committed to the vision and competent to execute their proposal, aplausible program of curriculum, instruction, assessment, management andgovernance, and a pragmatic plan for moving the proposed school from paper toreality. The people, the program and the plan are equally essential. Withoutaprogram, there is no way to know whether "good people" are appropriate for the

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proposed school. If their is no plan for the implementation of a "good program,"the transition from proposal to an operational school is bound to be chaotic. A"good plan" means little without the right people to implement it. In the end,the right people will surmount most difficulties, but charter school programsshould not be about designing and building planes even while they are beingflown. Chartering agencies are under some obligation to know in advance ofgranting a charter that the proposed educational program will improve studentperformance.

7. Recognize that .4;1-1cr......i...e. looking 101reasons to take a chance as well as reasons to disqualifyan applicant.

Charter school programs are an experiment and individual charter schoolslaboratories for educational improvement. Charter holders, charter school staffsand even chartering agencies are to some extent the subjects of this experiment.Never the less, the principal subjects are children, whose years in grade for theduration of this experiment will be irretrievable. But children are also intendedto be the principal beneficiaries of charter schools, and to improve theireducational opportunities charter agencies must be prepared to take calculatedrisks.

8. Give applicants as much autonomy as they canhandle but not much more.

Depending on the charter statute in their state, chartering agencies may or maynot have control or influence over the scope of autonomy granted to individualschools. Where they have no control, agencies must assure themselves thatapplicants are truly qualified to exercise their autonomy responsibly. And underall charter statutes, agencies must be convinced that an applicant's educationalprogram is sound and the proposed staff can implement it. But where they havecontrol, chartering agencies should not hesitate to offer applicants withweakness in business, legal compliance, or some other aspect of schooloperations, the option of improving the application or reducing the scope ofautonomy under the charter. There may be an argument for giving applicantsslightly more than they can handle now to push them not to become complacent,but a chartering agency's responsibilities to children, taxpayers and society atlarge should prevent it from giving power and authority where it cannot behandled responsibly.

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9. Create an oversight process with intermediatestandards of performance and sanctions.

Agencies require formal means of intervention in problem schools short ofcharter termination. They need means of measuring a charter holder's progresson implementation of the charter program and achievement of educational andother goals specified in the charter. These may be contained in the applicationitself or regulations promulgated by the agency. Either way, applicants need fairwarning about agency expectations of performance and a clear understanding ofthe consequences of failure.

10. Create strong working relationships with otheractors in the charter school system.

The success of a charter program depends on the efforts of many individuals andgroups in the public and private sector. A chartering agency should work hardto shape those groups into a system. A pool of qualified charter holders must beidentified and nurtured; technical assistance organizations, foundations,professionals and bankers need the right information on agency attitudes anddecision criteria; and the cooperation of other government agencies is essential.Agencies should not wait for these groups to arrive at the door, they should seekthem out and begin a dialogue.

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